CFPB Report Examines Manufactured Housing Loan Applications

Approval rates for manufactured housing and chattel loans lagged behind those for site-built homes, according to a new report released by the CFPB today. About 35% of manufactured housing applications resulted in a loan being originated, while 32% of applications were denied. The remaining percentage of applications were either withdrawn by the applicant, closed due to incompleteness, or were approved but not accepted by the borrower.

Site-built homes, meanwhile, had approval rates around 73% and denial rates of around 7%. The report acknowledged that “borrowers of site-built mortgages have higher median income and credit score than manufactured housing borrowers.” Manufactured home loans, especially for homes on leased property, have generally been considered riskier and thus receive different treatment for underwriting purposes—for example, the Federal Housing Administration guarantees manufactured home loans under a different program than it does for traditionally built houses.

Chattel loan applications—those made for the purchase or refinance of mobile homes where borrowers do not own the underlying land—had an origination rate of about 20% and a denial rate of around 50%, though the CFPB noted that this could be due to the fact that “borrowers may not know which lenders offer chattel loans and, therefore, apply for chattel loans from lenders that do not offer them, which leads to higher denial rates.”

The report noted that “compared to mortgages for site-built homes, [manufactured housing]mortgages tend to have smaller loan amounts, higher interest rates, fewer refinances, and less of a secondary market, patterns that are even more acute for chattel loans. Additionally, chattel loans have shorter loan terms than mortgages for either [manufactured housing]or site-built homes.”