What's the deal on the FHA Modernization Bill or the FHA Expanding Homeownership Bill that is supposed to help manufactured home owners?
Speculated to have been packaged, sealed and signed by the President during the first quarter of 2008, the long-awaited, long promised FHA Expanding Homeownership/Modernization bill is still being tossed around in two different versions, one in the Senate and one in the house and many think it is still slow in coming, if ever. The reason this impacts many manufactured home owners is that many homes that will be newly cleared to qualify for FHA-insured loans are located in manufactured home parks and communities. Also since a large number of parks are predominately senior communities, the FHA-insured Reverse Mortgage product holds increasing appeal to them in their retirement years. A Reverse Mortgage is a loan against a home that is not payable until the homeowner dies, sells the home or permanently moves out. Reverse Mortgages allow homeowners age 62 and older to turn the equity in their home into cash without having to move or make a monthly mortgage payment. One of its benefits to the retiree is there is no minimum credit or income requirement to qualify for a reverse mortgage-just the appraisal value of the home. Since the majority of the reverse mortgage loans are FHA insured, this bill directly impacts a large number of manufactured home owners that live in parks.
Why can't many manufactured home owners currently qualify for Reverse Mortgages or other FHA loans? Many parks and communities began as a land lease or rental park where the residents owned their manufactured home, but paid monthly space rent. As residents in land lease parks sought to have greater control in their communities, they negotiated with the park owner to purchase their respective spot and the park was converted to resident ownership. One of the most popular methods for park purchase was using a condominium conversion plan. Even though the homes are on individual plots, the mere description of them as a condo has disqualified them from certain types of loans. This is confusing for most lenders and borrowers alike since FHA will insure homes in approved condominium projects and manufactured homes that are in parks that have been installed on a permanent foundation system in Planned Unit Developments or a subdivision, but currently excluded are all manufactured homes located in a condo community. Thousands and thousands of borrowers are restricted simply because the legal description on their title specifies "Condominium". Either of the bills cited above would remove the exclusion and this has been much heralded by homeowners and lenders alike. While there seemed to be enthusiasm on both sides of the aisle and even the President, both bills seem to be at a complete standstill and maybe will be abandoned altogether.
Many people that live in a condo park don't even know they are classified as such. Drag out your grant deed or your title insurance and read the full legal description. If it mentions condo or percentages of ownership, you probably live in a manufactured home condominium project. And the cautionary tale for those residents in a condo park is this-please be careful if a lender promises they can get you a Reverse Mortgage loan. It is not likely they can perform unless they are dealing with private money. An FHA-insured loan will probably collapse at the underwriting stage. If you decide to pursue the process, make sure the lender will pick up expenses of the appraisal and the engineering certification. Another cost to avoid unless your loan is clinched is to pay to put your home on a permanent foundation. This may cost thousands of dollars and if your loan is declined, you may be left with this additional expense.
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