ABA Banking Journal
By Corey Carlisle
With more than 50,000 manufactured housing communities in the United States—roughly six percent of the overall housing market—borrowers are drawn to manufactured homes, as they often cost significantly less than new site-built housing. As such, manufactured housing remains a critical source of affordable housing for many consumers—particularly the elderly, low- to moderate-income families and those living in rural communities. Some innovative lenders and their community partners are scaling a resident-ownership model where homeowners in MHCs can become community owners of the land on which their homes resides.Manufactured housing is often confused with mobile homes or trailers, but is a actually a specific type of housing built according to the U.S. Department of Housing and Urban Development’s standards. MHCs are built in a factory before being transported to a plot of land the homeowner buys (most commonly), or they may be placed on rented land. These MHCs often require homeowners or renters pay additional fees for shared services and amenities. A manufactured home’s appreciation generally comes from the land value, and not the structure itself. Thus, having ownership or control of the land is the key ingredient to the homeowner’s financial security.
Manufactured housing greatly expanded in the 1990s before contracting in the early 2000s as consumers began defaulting on their loans. Today, MHC development remains depressed due to a limited secondary market, as well as local zoning ordinances and land commanding higher prices for single-family subdivisions and other commercial development. Those seeking to maintain this affordable housing stock must compete with private purchasers on both purchase price and timely execution.
The $2.2 billion-asset National Cooperative Bank in Hillsboro, Ohio, has forged a national financing program with ROC USA Capital, a U.S. Treasury-certified Community Development Financial Institution, and MetLife to finance resident-owned manufactured home communities, also known as ROCs, to scale to benefit low- and moderate-income communities nationwide. The program provides first mortgage and acquisition to permanent loans to finance the conversion of resident associations of MHCs to cooperative ownership in 20 states.
NCB and MetLife have each committed $15 million, and ROC USA Capital $10 million over two years. The three partners understand the critical need for affordable homeownership across the country and have structured the loan program to bring affordable long-term fixed-rate financing to buyers. ROC USA Capital is the originating lender, lead lender and loan servicer for each of the underlying project loans. National Cooperative Bank has committed $15 million and will serve as lead for the senior participant lender group.
As ROC USA sources transactions, NCB performs due diligence, with underwriting completed by NCB’s specialty finance and commercial real estate teams. In addition to financing, their network will provide technical assistance to the newly formed housing cooperatives to enable homeowner groups to buy, own and improve their communities as neighborhood stewards. Since the launch of the financing initiative in 2015, the program has successfully converted two MHCs to limited equity ownership totaling approximately $12 million. The program is aligned with the bank’s mission to support low- and moderate-income communities and cooperative development and also leverages NCB’s deep experience in financing housing cooperatives to provide community development lending.
The program’s innovation in providing an efficient path to resident ownership when homeowners seek to own the land on which their community resides, won NCB the Community Commitment Award for Affordable Housing at ABA’s 2016 Annual Convention.
