Aiming to prop up the sagging manufactured housing market, Fannie Mae last week said it will once again buy 30-year loans with as little as 5 percent down on factory-built houses.
For the time being, the big secondary-market institution will deal with only nine lenders. But at a sparsely attended Capital Hill press conference, the company pledged to work with the nine companies to help "transform" the manufactured housing market by developing processes and procedures that lower the risk associated with such mortgages.
Ultimately, the government-sponsored enterprise plans to incorporate these "best practice" measures into its guidelines for all lenders.
"We are teaming up with lenders who serve this market to set the right standards, force out the bad actors and give the manufactured housing market the scrutiny and status it deserves," Chairman Frank Raines said.
Sometimes known as HUD-code houses, manufactured homes are the only ones in the country built to a single, national standard.
Usually sold from used car-like lots along the side of highways and byways in rural locations, the houses are assembled on individual chassis in a factory, pulled to the building site and attached permanently to the ground.
Manufactured homes are often ridiculed as "trailers," as they were once known. But 25 million people live in them. More importantly, they are starter homes for many rural families and the last homes for many seniors.
Fannie Mae has long invested in manufactured housing loans, but stepped back last year because of problems in the business.
Many large manufacturers and retailers have exited the market or declared bankruptcy, largely because of a high rate of delinquencies among their buyers. According to industry sources, the number of repossessions and foreclosures is at an all-time high.
In August, Fannie Mae said it would limit loan-to-value ratios to 90 percent and work only with those lenders that understood the special requirements of dealing with factory-built houses, including titling the units as real property as well as appraisals and servicing issues.
Now it has identified AgFirst Farm Credit Bank, Flagstar Bank, GMAC Manufactured Housing, Huntington Mortgage Group, Origen Financial, RBC Mortgage, 21st Mortgage, Vanderbilt Mortgage, and Washington Mutual as lenders which have demonstrated the "high levels of expertise necessary" to lend on manufactured homes.
"We believe lenders that employ these types of additional measures to mitigate the risks associated with lending on mortgages secured by manufactured homes are good candidates to offer a 30-year, 95 percent loan-to-value mortgage," Fannie Mae said in a letter to lenders.
Raines said the company's goal is to protect consumers from aggressive sales and lending practices, excessive fees and charges, faulty appraisals and poor disclosure that too often cause home buyers to lose their homes.
"We need to ensure that buyers receive the right loan for the right property, are placed in loans that will allow them to keep their homes over the land haul, and are not asked to may for more house than they get," he said.
At the press conference, which was attended by more Congressmen than reporters, Rep. Mark Green, R-Wisc., who authored a letter signed by 20 of his colleagues urging Fannie Mae to look for ways to expand ownership opportunities in rural markets, said the hinterlands are often forgotten when the topic of affordable housing is mentioned.
"When we talk about housing policy inside the Beltway, we're locked into the mindset of big city public housing," he said. "But most people have no connection to that."
Reps. Bob Ney, R-Ohio., Baron Hill, D-Ind., and Ken Lucas, D-Ky., whose districts are almost entirely rural, also were on hand to complement Fannie Mae's return to 95 percent lending in the country's heartland.
Rep. Lucas called it "a great day for millions of Americans," and Rep. Hill said the move "is not just about housing, it's about people's lives." Manufactured homes "are a great fit for a lot of people," Rep. Ney added.
Rep. Barney Frank, D-Mass., whose Boston area district is decidedly non-rural but had nevertheless chided Fannie Mae for "turning away" from manufactured housing, labeled the announcement "one of the most important things to happen to make home ownership affordable to people who might otherwise be shut out of the market."
"This is both more and better," the ranking minority member of the House Financial Services Committee said in praising the initiative.
He also noted the apparent lack of interest on the part of the press in what he called "an essential part of any program to increase home ownership in America."
Had Fannie Mae Chairman Frank Raines been stopped for speeding on the way to the press conference, the media "would have been all over it," Rep. Frank said, referring to the deluge of stories in the popular and financial press about accounting errors and oversight at the company and its sister GSEs, Freddie Mac and the Federal Home Loan Banks.
"If you read those stories," the 12-term lawmaker said, "you'd never know these are housing companies."
Rep. Frank's comments gave Raines an opening to repeat his warning that any major change in the manner in which the GSEs are regulated could hurt his company's capacity to step forward when it is needed.
"Anytime you have to go to a regulator to approve a new product, you have to consider that our ability to mobilize this number of lenders would be greatly impeded," the Fannie Mae chairman said. "I'm not sure they'd even want to be our partners."
But Paul Nichols of Vanderbilt Mortgage, Ron Klein of Origen Financial, Chris Gibson of GMAC and Richard Ray of 21st Mortgage left little doubt they wouldn't want to be part of the effort.
"Everyone in this country deserves a chance at home ownership," said Gibson.