As mobile homes have become less like vehicles and more like conventional houses, more financing options have developed for them.
At one time, buyers of these residences were only given short-term, high-interest loans, similar to those available for automobiles. But as prices of builder-constructed houses have escalated, and "manufactured housing" has taken over a larger share of the modest-priced market, financial institutions have become willing to provide regular home mortgages for mobile homes.
The latest and most significant indication of the new status of mobile-home financing is a reversal in policy by Fannie Mae -- the Federal National Mortgage Association -- the country's largest single supplier of home-mortgage funds.
Fannie Mae last week announced that it would begin a nationwide program of buying mortgages for manufactured housing -- homes built either entirely or in sections away from their lots. In the past, Fannie Mae had only a limited program in a few states for homes that were not built on-site, because of legal ambiguities that it says now have been resolved.
Fannie Mae provides new mortgage money to lenders by buying their outstanding mortgage loans.
"We expect...FNMA's willingness to purchase mortgages on manufactured homes to expand the availability of financing for such units. This, in turn, should increase the supply of manufactured housing itself, an affordable alternative for many families to higher-cost conventionally built homes," Fannie Mae Chairman David O. Maxwell said in a statement.
The change in Fannie Mae policy follows the transformation of the typical mobile home from an eight-foot-wide, easily moved "trailer" to a more sophisticated and permanent manufactured home that may have more than 2,000 square feet of living space. They now have porches and decks, and it can sometimes be difficult to distinguish a mobile home from one constructed by a builder.
As differences between mobile homes and houses built on-site have diminished, so have financing differentials. Fannie Mae's new policy could accelerate the trend.
A recent survey by the Manufactured Housing Institute, the national trade association for the mobile-home industry, showed that banks and savings and loans across the country increasingly are offering terms for mobile homes that are similar to those for conventional homes.
Of 387 financial institutions responding to the association's survey, 41 percent said that in 1980 they offered conventional simple-interest loans, rather than higher-interest installment-credit loans, for multisection mobile homes. In 1979, 271/2 percent of those surveyed provided only simple-interest financing.
In addition, the number and size of loans being made for manufactured homes is rising, the loan periods are lengthening and minimum required down payments are decreasing, the association's survey indicates.
The survey found that finance companies and savings and loans increased their mobile-home portfolios while commercial banks decreased theirs. It showed an 18 percent increase in gross dollar volume for all mobile-home loans made by the surveyed financial institutions, and an 111/2 percent rise in the number of mobile-home loan accounts outstanding.
Congress soon may give another boost to mobile-home financing through the Veterans Administration. An amendment passed by the Senate last month and expected to be adopted in a House-Senate conference committee would lengthen VA guaranteed-loan periods for manufactured homes. These periods would go up to 25 years for multisection mobile homes with lots.
Sen. Alan Cranston (D-Calif.), cosponsor with Sen. Alan Simpson (R-Wyo.), of the amendment, said the change would help increase the availability of credit for veterans wanting to buy mobile homes by conforming the VA terms to those of FHA and enabling the VA loans to be included in secondary market pools.
The VA announced that in June its loan applications for mobile homes jumped by 170 percent over the figures a year earlier.
The change in policy at Fannie Mae was made possible by a Federal Home Loan Bank Board ruling July 28. The ruling clarified when a manufactured-housing mortgage could be considered a real-estate loan, regardless of ambiguities in state laws.
There may be a few states in which Fannie Mae will not be able to buy the mortgages because of laws specifically preventing mobile homes from being treated as conventional housing for loan purposes, but the vast majority of states have no such prohibition, a Fannie Mae spokeswoman said.
For Fannie Mae to buy a mortgage for a mobile home, the home must comply with local and federal building standards; be permanently attached to a lot, with wheels and axles removed; be sold as a package with the land and be comparable to site-built housing in the area.
The Coordinating Council on Manufactured Housing Finance, formed in 1978 to bring financing for mobile homes into line with that for conventional housing, expressed "complete delight" about the announcement by Fannie Mae.