Housing and Economic Recovery Act of 2008 (HERA) granted authority to
add individual manufactured housing units located in condominium
projects to HUD for FHA insurance. This property type had always been ineligible prior to this legislation for loan programs insured by FHA, which included the HUD insured Reverse Mortgage HECM (Home Equity Conversion Mortgage).
With the issuance of HUD Mortgagee Letter 2009-16,
dated May 21, 2009, senior borrowers, age 62 and over may now obtain
government-insured reverse mortgages on these properties provided the
properties meet HUD guidelines. At least, according to HUD they
are now eligible.
This is good news for senior
borrowers but there are some things that every senior borrower living
in a manufactured condominium project needs to keep in mind.
Firstly, lenders are not yet ready to accept the product and none have
announced their guidelines and/or procedures for handling these loans
for the HECM product.
HUD may state that they
can take it, but the lenders have to announce how they will handle it
since HUD is not the actual funding source. As of this writing, no
lender has yet announced their program for these loans and therefore,
no one has any way to determine what, if any, additional lender
requirements may be imposed as well.
HUD’s announcement states that until they can
send out updated condominium project approval guidelines for
manufactured condominium projects, that the project approval is subject
to the requirements found in HUD Manual 4150.1, Chapter 11. The
Mortgagee Letter goes on to specify that their “Spot Loan
Approval” process is not available (as outlined in Mortgagee
Letter 1996-41) and that all manufactured housing condominium projects
must obtain full approval by the applicable Home Ownership Center (HOC)
for HUD that has authority over the geographical area where the project
...But what does all that mean?!
other things, it means that since this type of project has never been
eligible for approval in the past, none of the projects are on the HUD
approved projects list and every single project will require HUD
approval for the Reverse Mortgages to be completed until at least one
of the units in the project have been done and HUD has approved the
project. The HUD portion of the review and approval currently
takes approximately 6 – 8 weeks for the project alone.
Chapter 11 of the 4150.1
manual is approximately 32 pages long and encompasses everything from
owner occupancy requirements, to common facility completion
requirements; legal review of the condominium documents to phasing
eligibility; review of the insurance of the project to management
agreements and operating budgets and much more. Different things
are required depending on the age of the project. In addition to
the 4150.1 for condominium projects, the property also has to meet
HUD’s guidelines for manufactured housing which, per HUD
|Have a floor area of not less than 400 square feet;
constructed after June 15, 1976, in conformance with the Federal
manufactured home construction and safety standards, as evidenced by an
affixed certification label in accordance with 24 CFR Section 3280.8; (manufactured homes produced prior to that date are ineligible for insured financing);
|Be classified and subject to taxation as real estate;
mortgage must cover both the manufactured unit and its site and shall
have a term of not more than 30 years from the date amortization begins;
|Built and remains on a permanent chassis;
|designed to be used as a dwelling with a permanent foundation built to FHA criteria; and
finished grade elevation beneath the manufactured home or, if a
basement is used, the lowest finished exterior grade adjacent to the
perimeter enclosure, shall be at or above the 100-year return frequency
can only hope that reverse mortgage lenders clarify their positions on
this program soon so that we can begin accepting applications but they
may not be able to do so until HUD issues their further clarifications.
Until HUD issues further updated guidance on processing of condominium
projects for manufactured housing units and the lenders issue their
guidelines accordingly, the process for getting a manufactured
condominium project will remain unsure and therefore no lender may want
to be “the first on the block” to learn the hard way that
they got it wrong.
Lenders knew that HUD
was going to be accepting the manufactured homes in condominium
projects ever since the passage of the HERA in August of last year, but
without HUD’s clarification, lenders are hesitant to jump out and
try to implement the program.
Even when HUD
does issue the guidance, it may remain very lengthy process to obtain
project approval if the “Spot Loan Approval” process is not
instated for these projects as well. The Spot Loan Approval
process as outlined in Mortgagee Letter 1996-41 allows for a small
percentage of a project meeting certain HUD guidelines to receive
approval without the entire project having to be approved.
would give lenders a chance to lend on 10 – 20% (depending on the
size of the project) without having to get complete project approval.
That would allow senior borrowers to start in some projects until the
project can become approved or in the case of those projects that never
would become approved, it would allow a small percentage of senior
borrowers to still be able to access the equity in their homes through
the HECM program.
>Click Here to receive your detailed comparison We
will return a complete, no-obligation personal analysis including
amortization schedules and costs associated. Rather Talk to an
Expert?... (888) 801-2762 Ext 1