Update on ‘Duty to Serve’ Plans from Freddie Mac
Manufactured housing has a crucial role in solving our nation’s affordable housing crisis. Millions of America’s families rely on manufactured housing – especially in rural areas. Today, more than 17 million Americans live in manufactured housing and the need is only expected to grow.
With this understanding, the Federal Housing Finance Agency (FHFA) tasked Freddie Mac to develop a comprehensive plan – under Duty to Serve – to help solve the challenges of financing more manufactured housing and to support much needed affordable housing for families.
As we developed our Duty to Serve plan, Freddie Mac listened to industry feedback. This includes feedback from manufacturers and other stakeholders. Last year, we formed the Manufactured Housing Initiative Taskforce, which includes a diverse group of industry participants. Part of the objective of this task force is to address enhancements to Freddie Mac’s existing offerings. The offerings include flexible underwriting and product features that can be efficiently and effectively launched and adopted by the market, as well as socialization of features we plan to bring to market.
We value the expertise of our partners and will leverage their market-specific knowledge to address the needs of the manufactured housing market.
And we’re already making changes for the better
For example, our single-close construction loan process will be extended to borrowers of manufactured housing titled as real property. This allows the borrower to finance both the construction and the purchase of the home using one loan. Once the construction of the manufactured home is complete, the loan seamlessly converts into a permanent loan bearing a fixed or adjustable rate.
This will make approvals faster, reduce closing costs and eliminate unnecessary paperwork. And for lenders, it will mean less risk.
We will continue to do more. One concern that came across loud and clear from our conversations with stakeholders. That is that there’s a limited number of lenders that provide financing to manufactured home buyers. To solve for that, market participants encouraged us to expand liquidity, implement standardization measures and enhance consumer protections.
Over the next three years, Freddie Mac plans on doing the following for manufactured housing titled as real property:
- Work with lenders to increase our purchases of loans in this important market segment,
- Increase access to education and resources for future homebuyers,
- Identify best practices and provide technical assistance to market participants, and
- Develop additional loan features to meet the market’s needs.
For manufactured housing titled as personal property, or chattel, we plan to work with market participants to:
- Promote a greater understanding of the market by conducting research and publishing the results,
- Initiate a chattel pilot offering, and
- Develop homebuyer education to support chattel financing.
Taking a test and learn approach
Our partnership with Kentucky-based housing intermediary Next Step focuses on educating potential buyers of manufactured homes, with the ultimate goal of expanding responsible homeownership of energy-efficient manufactured homes. Next Step’s leadership in the field, range of relationships and passion make them the right partner for this effort. We’re encouraged by the results so far.
At Freddie Mac, we are reimagining the mortgage experience and leading the mortgage industry to look at housing issues in new ways, understanding the broader problems facing these markets and applying a new generation of solutions.
As we move forward, we will continue to engage with the industry, community organizations, all levels of government, and other dedicated organizations to take action and give lenders additional tools and resources to better serve the manufactured housing market.
We look forward to meeting more industry participants at the 2018 MHI Congress and Expo in Las Vegas, to listen to your ideas, and share ours, for this vitally important market.
Mike Dawson is vice president of Single-Family Affordable Lending Strategies & Initiatives at Freddie Mac. He leads affordable products and offerings, strategies, research, and regulatory and conservatorship activities associated with broadening access to credit. Among his previous roles, he oversaw Single-Family technology and data initiatives and managed Freddie Mac’s structured products issuance programs, including REMICs, Strips, and other structured securitizations.
