As consumers see a more affordable path to homeownership, lenders see the potential of a new revenue stream.

Market conditions have made it tough for many consumers to achieve their homeownership goals over the past few years, as high home prices and interest rates, low inventory and bidding wars have stubbornly stood in their way. Manufactured homes are emerging as a viable, and increasingly popular, solution for first-time homebuyers as well as anyone looking for a more affordable option to traditional on-site building.

“Manufactured home builders are stepping up to address the housing shortage and affordability issue to help satisfy demand for single-family homes,” says Dave Howard, executive vice president of origination sales at ServiceLink. “While unit construction is nowhere near what it was back in the ’90s, it has been growing steadily since the real estate crash of 2008. Our estimates, based on available data, reflect that manufactured homes represent about 11% of the housing market right now. As momentum continues, this market holds opportunities for not only homebuyers but also lenders looking for another potential source of loans in today’s higher-interest-rate market.”

Fannie Mae research confirms homebuyer interest. Notably, 68% of millennials and 62% of overall respondents to a recent survey said they would consider purchasing a manufactured home in the future. Even more — 77% — shared positive sentiments toward manufactured homes, using terms including “efficient,” “affordable” and “easy” to describe them. It’s not surprising, then, that many lenders are giving manufactured home mortgages a fresh look. Meeting borrowers where they are goes a long way toward building loyalty as well as revenues.

The basics of manufactured homes

The term “manufactured home” includes both modular and mobile homes. In contrast to “stick-built homes” — wood-frame homes constructed on the property site — these homes are built inside a manufacturing plant or warehouse and later transported to the owner’s property. The controlled setting and production processes make them less expensive to build and less prone to vandalism than their stick-built counterparts. Plus, Howard adds, they take about 40% less time to build than a traditional site-built home.

Industry veteran Tamara Clawson, account executive, origination title & close, ServiceLink, explains the differences between modular and mobile homes: “Modular homes have a wood base frame. Section by section, they are placed on top of a trailer and taken to their respective properties for setup. Mobile homes, on the other hand, are steel-framed — the trailer is the base of the home — so it has wheels, tires and axles to transport it. Once the home is placed on the property, the wheels, tires, axles and hitch can be cut off and either removed from the property or stored under the home.”

Shattering myths, overcoming obstacles

For years, negative perceptions persisted about manufactured homes: They weren’t as well-built as traditional homes, wouldn’t hold up as well under severe weather conditions, weren’t considered “real property,” and offered their homeowners no choice in materials and options. And while some of those criticisms may have been true a decade or more ago, today’s modular and mobile homes have, in Clawson’s words, “definitely upped their game.”

She shares, “In the past five to 10 years, the quality of the build has increased tremendously. The materials are high-quality, the homes are just as well-insulated as a traditional home, and manufacturers offer homebuyers customization options — marble countertops or brass fixtures, for example — just as they would for a stick-built home. As far as being considered a ‘real’ home or real property, modular homes are automatically considered real property, and mobile homes become real property through the titling and conversion process.”

While homebuyer perceptions appear to be evolving, as evidenced by the Fannie Mae research, a January 2024 report by the Joint Center for Housing Studies of Harvard University cites a significant roadblock that continues to stand in their way: lack of widespread access to mortgage financing for manufactured homes. The complex and time-consuming titling process, which differs by state, discourages some lenders from offering mortgage financing for these home purchases.

Susan Falsetti, managing director, origination title & close, ServiceLink, says, “More lenders are getting into this space. Those who are succeeding understand the differences of insuring a manufactured home versus a stick-built home, and have engaged experts in the titling and conversion process to ensure the work is done right. Manufactured home financing requires special care; taking shortcuts to get the loan closed quickly is not the right path.”

What’s different about titling manufactured homes

While modular homes can be titled as real property through the same process stick-built homes are, mobile homes must be converted from personal property to real property. This process can be quite different from state to state, Falsetti points out, and any number of variables can make it more complex and time-consuming. “If a lender is working with a title company that doesn’t take the time to make sure the title has been surrendered properly, they’re going to have a real issue in the event of a foreclosure. Doing the conversion correctly up front is critical.”

In short, manufactured home title processing entails first titling the home in the same way a car is titled and then converting it from personal property to real property. Clawson explains, “The dealer who sold the home to the buyer provides them or their title company with the manufacturer’s statement or certificate of origin once the home is built. Depending on state, the title company then works with the buyer to apply for the title from the DMV, so that the home is placed in the buyer’s name, with or without a lienholder. Then the conversion process begins. Per state guidelines, the home’s vehicle title is canceled or deactivated, any recordable documents are sent to the county for recording, and the home is assessed with the land.”

Clawson details some issues that might arise in the event the conversion process is handled inappropriately:

• In the case of foreclosure, if the home was not insured or converted to real property correctly, and the lender did not have clear title or full conversion of the manufactured home, they would not be able to foreclose because they did not have the vested interest in the home to foreclose upon.
• In the case where the conversion process was never completed and there’s an open title at the DMV stating the home is in the previous owner’s name, that party could come back and physically remove that manufactured home from the property even though the new homeowner purchased it.

“Lenders should never look at a manufactured home transaction as just another purchase or refinance transaction,” Falsetti says. “This is a different, specialized process that requires people with the right expertise and experience.”

Partnering for success in the manufactured homes lending space

The right title partner can make all the difference to a lender looking to get into manufactured home lending, but it’s important to understand that most title companies don’t offer expertise in this area, Clawson says. “ServiceLink is one of the few title companies that is willing to process and insure manufactured home conversions. We have a dedicated manufactured home team with decades of experience in processing these titles from point of purchase to real property conversion.”

Adds Howard, “ServiceLink has not only more than two decades of experience doing manufactured home purchase and refinance transactions, but also a full-scale operation facilitated by technology that enables our team to be as efficient as possible. There are parts of this process that take a lot of time — dealing with local municipalities to get liens cleared, for example. Many other title companies have chosen not to step up to the challenge. We step up, not just doing the hard work, but also communicating with the lender and borrower so everyone understands why things are happening the way they are. As ServiceLink lifts the burdens of time and complexity, lenders have an opportunity to establish new relationships as they tap into a new revenue stream.”

Falsetti says that having the right people in place is vital to ServiceLink’s excellence in this space. “This process can be overwhelming for some borrowers, so having knowledgeable, patient representatives to help them understand the process and the nuances of their state, and explain that we will do the work on their behalf, reassures them at a time when they may be making the biggest investment of their lives.”

At the end of the day, Howard adds, it doesn’t matter what type of transaction it is, whether a traditional site-built home, condo or manufactured home, there’s a customer on the other end that needs to be cared for — treated with respect, expertise, transparency, communication and trust.

“Our ServiceLink team builds those things into all types of transactions — not just the easy ones,” he says. “From our perspective, there is always a person on the other end of that transaction who is trying to better their lives. It’s not about the physical piece of property to them; it’s a means to an end for something they want to do positively for their life. We approach our service with that in mind, never shying away from the difficult transactions, because we know we’re making a difference.”

For more information on ServiceLink’s title services and how we can support your manufactured home lending needs, contact us today.

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