San Antonio CU Finds Reward in Manufactured Home Lending
In the fall of 2002, San Antonio Federal Credit Union (known as SACU) developed a CUSO, CU Factory Built Lending, which has 110 employees.
"We've replicated the Chase Manhattan Bank model and hired the bank's former employees with skills in this specialized area of lending," said Jeff Farver. "The competition in manufactured home financing is minimal and the average credit scores are exceptional-745 FICO."
The numbers for the manufactured home portfolio would bring a smile to most CFOs. As of May 31, 2006, the credit union had $287 million of manufactured home loans in a loan portfolio of $1.789 billion. And out of 6,000 loans only 16 are currently delinquent.
"We are approving only 20% to 25% of all applications," said Farver. "Those who were refused loans had bad credit or insufficient credit scores. We are very careful. We want to prove to the regulators that it can be done." Low or moderate income doesn't mean bad credit, according to Farver. "We make affordable housing loans to people with good character and high credit scores."
Manufactured housing loans are unique; they are made on the homes only, not the land. The homes are typically in a planned community-the term "trailer park" is pass?-where residents pay rent for the land. The economics of manufactured homes are compelling. It costs about $32 per square foot, without land, to build a manufactured home, compared to a site-built home at $78 a square foot. The mortgage terms are usually an advantage for the financial institution. The average term for a manufactured home is 7.5 years on a 20-year mortgage, while the average term for the conventional mortgage in 5.3 years.
Unlike other lending markets, there are few players in the game. San Antonio FCU's program provides affordable housing for many members who would not be able to afford traditional housing. For credit unions, manufactured housing offers high yielding loans, improved margins and the ability to meet member needs. Advice for credit unions?
"Don't get into manufactured housing unless you are willing to hire professional staff that has been in the business," said Farver. "You need product knowledge experts. The same goes for RV or marine lending. It takes a lot of hard work and it isn't a magic bullet. It took us 21 months to make a profit."