Consumers tend to be rural and lower income, and those who do not own the underlying land have the greatest challenges
Today the Consumer Financial Protection Bureau (CFPB) published a report that provides new insights into manufactured housing financing, a vital source of lending for millions of manufactured housing homeowners. Manufactured housing is a small segment of the overall housing supply, but it is one of the most affordable types of housing available to low-income consumers and makes up 13% of the housing stock in small towns and rural America. Those low acquisition costs, however, often come coupled with higher interest rates and limited opportunity to refinance. Consumers who do not own the underlying land are more likely to see their homes depreciate and have fewer protections if they fall behind on payments. These factors combined can make this affordable housing a potentially risky avenue for homeownership. The CFPB’s report uses new information collected under the Home Mortgage Disclosure Act to shed light on the experiences of these often-overlooked families.
“This report shows the power of the expanded Home Mortgage Disclosure Act data collection to understand the path to homeownership for some of our most vulnerable families, including Black, Indigenous, and Hispanic families, as well as rural and lower-income families of all races and ethnicities,” said Acting Director Dave Uejio. “Much more work needs to be done to understand the options available to these families and how best to help ensure that manufactured housing homeownership can be a path to financial stability for the rural and lower-income families who depend on it.”
The CFPB’s report is based on new information about manufactured housing that was added in 2018 to the list of HMDA data collected. This new HMDA data is the only national level dataset that directly tracks the different types of financing options for manufactured housing. Among the findings in this report:
- Overall, around 42% of manufactured home purchase loans are “chattel” loans, which are secured by the home but not the land. In general, chattel loans have higher interest rates and fewer consumer protections than mortgages. Consumers may choose to get chattel loans to avoid putting the underlying land at risk if they default on the loan.
- Most manufactured home loan applications are denied, and less than 4% of chattel originations were for refinances. Homeowners seeking a loan on a site-built home are approved more than 70% of the time, but less than 30% of manufactured home loan applications are approved. At the same time, even during 2019’s low interest rates, very few manufactured housing loans were refinance loans.
- The top five lenders account for more than 40% of manufactured housing purchase loans, and nearly 75% of chattel lending. The four largest originators are specialty lenders that primarily offer chattel loans to manufactured housing owners. Over time, nonbank lenders have played an increasing role in the manufactured housing lending market, while banks have decreased their activity or exited the market altogether.
- Hispanic, Black and African American, American Indian and Alaska Native, and elderly borrowers are more likely than other consumers to take out chattel loans, even after controlling for land ownership. Black and African American borrowers are the only racial group that are underrepresented in manufactured housing lending overall compared to site-built, but overrepresented in chattel lending compared to site-built.
Manufactured housing is an issue of major importance for rural Americans and an important option for affordable housing. The two new manufactured housing data points available in HMDA data have helped fill significant gaps in the understanding of manufactured housing finance that the Bureau faced in its 2014 report on manufactured housing . The CFPB’s report today illustrates the importance of the expanded HMDA data for addressing critical research questions regarding consumer finance for all Americans, even as more work remains to be done to understand manufactured housing lending and the options available to manufactured housing homeowners.