The National Coinmission on Manufactured Housing, established by Congress in 1990, submitted its final report last month.

The report pointed out that a quarter of all new houses built last year were mobile homes. But it also pointed out obstacles to the expansion of the industry, which it said had the potential "to address the urgent demand for affordable housing."

The following has been adapted from the report's recommendations on financing.

Financing of manufactured homes generally resembles automobile financing rather than conventional home mortgage financing. As a result, manufacturedhome loans typically have shorter terms and higher interest rates than conventional mortgage loans, for two primary reasons:

* A substantial number of homes (37% in 1990) are located in rental parks, and are not eligible for real estate financing.

* Most new homes are sold by retailers, who typically do not provide access to mortgage financing, even for those who place their homes on private property.

Retailers prefer to finance manufactured homes with conventional personal property loans, which can be approved much more quickly because they can be disbursed before the unit is moved and installed in its new location. Also, underwriting requirements for personal property loans are different, and such loans are typically processed in one or two days.

Under the current financing system, homeowners lose some benefits of affordability because their monthly loan payments are higher than they would be for conventional mortgage financing. For example, the monthly payment for principal and interest on a 30-year, 7% mortgage loan of $30,000 is $200, whereas the payment for a 12-year, 11% personal property loan of the same amount is $376.

Only about 10% of manufactured homes sold today benefit from conventional mortgage financing. The trend, however, is in the direction of more homes being financed with mortgage loans. This trend reflects the increasing tendency to place homes on the owner's property. In 1981, 33% of existing homes were located on the owner's property, and by 1990 that percentage had risen to 39%.

The commission believes that the trend toward real estate mortgage financing is healthy and should be accelerated. The commission also recognizes that a significant number of homes will be located in rental parks for the foreseeable future, and that improved financing for these homes is desirable. Testimony documented the need for financing for resident purchases of rental parks.

Over the past several years, HUD and the Department of Veterans Affairs manufacturedhousing programs have tended to be relatively little used, in part because, with falling interest rates, lenders were prepared to make conventional personal property loans without the guaranty of federal insurance. The moratorium by the Government National Mortgage Association (Ginnie Mae) on the approval of new Title I lenders has resulted in a further reduction of activity under HUD's manufactured-housing program. A substantial rise in interest rates could, however, result in greater demand for these programs.

The commission's financing recommendations reflect a threefold strategy should make all its housing programs available for financing manufactured housing; real estate mortgage financing should be used to the maximum extent possible for manufactured housing; and where real estate mortgage financing is not available, personal property loans should be available with low down payments, and with interest rates and terms much closer to those available for real estate mortgages.

The commission encourages HUD to use manufactured housing in all of its housing programs, including the subsidized programs.

The commission recommends that HUD revise and extend the programs that provide mortgage insurance for single- and multifamily housing.

Revision of the manufacturedhousing park program to make it available for resident purchase or development of manufacturedhousing communities with modest down payment requirements would also help.

Finally, the commission recommends that HUD and VA simplify and reduce the down payment requirements on their respective manufactured-housing programs.

The commission also recommends that the Federal National Mortgage Association (Fannie Mae) and Freddie Mac provide secondary market financing for conventional personal property manufactured-home loans. These actions are necessary to ensure that a dependable source of credit for homes not eligible for mortgage financing is available to assist purchasers of affordable housing.

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