Protections for Owners of Manufactured Homes Are Uncertain, Especially During Pandemic

Manufactured homes, commonly known as mobile homes, are the largest source of unsubsidized affordable housing in the United States. Twenty-two million people live in these units, and in some counties, largely in the South and West, manufactured homes make up more than a third of the housing stock. And although they are particularly prevalent in rural communities, nearly half of all manufactured homes are found in suburban areas, and almost 1 in 10 are in center cities. However, despite the importance of manufactured homes as a source of housing, especially for low- and moderate-income families, most people who finance the purchase of these homes do not enjoy the same legal safeguards—such as robust protections against foreclosure and eviction in the event of default—that cover mortgage borrowers. These regulatory gaps place millions of already financially vulnerable Americans at risk.

Manufactured homes are built on a trailer or chassis, constructed in a factory, and moved whole on a truck to the property site. Originally designed to be relatively mobile, this type of housing has been produced for nearly 100 years, but the homes were often of low quality and quickly became dilapidated. Then in 1976, the Housing and Urban Development Manufactured Home Construction and Safety Standards set higher, more consistent building and quality requirements for the industry and officially changed the name of this class of home from “mobile” to “manufactured.”

In the four decades since, manufactured homes have evolved to look and function more like single-family homes than trailers, and today they are rarely relocated after initial placement. However, state laws and consumer protections have not kept pace and generally continue to treat manufactured housing as movable personal property or automobiles, rather than as real estate, or “real property.” As a result, manufactured homes in the U.S. typically are:

• Titled as personal property separate from the land on which they sit, even though in most cases, the same person owns the home and the land.  
• Financed using personal property loans, often called “home-only” or “chattel” loans, which use only the structure, and not the land under it, as collateral and tend to have higher interest rates and shorter repayment terms than mortgages. Personal property loans can sometimes be a form of seller-financing.
• Subject to fewer and weaker consumer protections than homes financed with mortgages because personal property loans are not covered by the Real Estate Settlement Procedures Act, which compels “pertinent and timely disclosures regarding the nature and costs” of the loan; generally are exempt from the legal foreclosure process; and typically do not require appraisals. As a result, buyers may overpay, and the homes can usually be quickly repossessed.

Most states’ laws make it difficult or impossible to change the titling of manufactured homes from personal property to real estate, which, in turn, limits otherwise-eligible buyers’ ability to use traditional financing. Research indicates that, based on land ownership, more than half of buyers who financed their manufactured home purchase with a personal property loan could have used a mortgage. Further, many such buyers have sufficient credit to get a mortgage: A 2018 study showed that personal property borrowers in Texas had slightly higher median credit scores than did manufactured home buyers who were able to obtain a mortgage.

The lack of access to traditional financing for manufactured homes, even among qualified buyers, is exacerbated by a shortage of small mortgages nationally and has significant implications for consumers’ financial safety. Traditional mortgage borrowers enjoy the protection of laws that generally require lenders to notify the homeowner of an impending foreclosure, give the borrower the “right to cure” a default by catching up on missed payments, and obtain a court order before reclaiming the property. But these protections generally do not apply to personal property loans. Consequently, borrowers who use these loans and then experience financial difficulties are in greater jeopardy of losing their homes and experiencing other harms compared with mortgage borrowers. And owners of manufactured homes tend to be older, lower income, and more financially vulnerable than owners of site-built homes, so this lack of protection is especially perilous.

In addition, owners who use personal property financing usually are not covered by state or federal legislation intended to protect against loss of a home resulting from a disaster. For instance, these borrowers are excluded from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides federal relief during the COVID-19 pandemic, and many state laws meant to add safeguards for homeowners pertain only to those with mortgages. As households contend with rising economic hardship as a result of the coronavirus, omission from these added protections could have dire consequences for the wealth and housing stability of millions of American families.

But lawmakers can act to better protect these homeowners. For instance, in Oregon, House Bill 4204, which supplemented the CARES Act and became effective June 30, 2020, specifically applies to any real or “personal property that is used as a residence,” which ensures that the legislation covers manufactured homes, regardless of the financing used.

As the pandemic and its consequences unfold, Pew will be studying the financing options available to manufactured-home buyers and examining whether changes in state or federal laws could improve those families’ financial stability for both the short and long terms.

Nick Bourke is the director and Rachel Siegel is an officer for The Pew Charitable Trusts’ consumer finance and home financing projects.