Americans face significant challenges when it comes to securing housing. Record low supply has driven the ability to purchase a home out of reach for many, and lack of access to safe and affordable financing has made the pathway to homeownership more difficult for prospective homebuyers, especially for Black, Hispanic, and Indigenous families.

Manufactured homes could be part of the solution. These homes are produced on a large scale in factories and cost about half per square foot compared with site-built homes. But Americans seeking to buy these homes often face higher credit standards and denial rates for loans compared with those buying site-built houses. Leading lenders for manufactured homes often keep the loans they make “in portfolio,” as opposed to selling them, a standard practice for site-built mortgages. Such companies then retain all of the financial risk and reward for each loan they make, but they tend to have the highest denial rates compared with lenders that largely sell their loans or use a federally backed program to defray losses if borrowers default.

Analysis by The Pew Charitable Trusts shows that mortgages through federal loan programs improve access to financing to purchase manufactured homes when the homes are owned as real estate—meaning the buyers also purchase or own the land and own them together just like with a site-built home. But more than 75% of new manufactured homes are purchased as personal property for which there is no functioning federal loan program. As a result, buyers have few financing options—just a handful of lenders make the majority of what are known as personal property “chattel” loans, and most loan applications are denied. Instead, those who want to buy but cannot obtain a mortgage or personal property loan are left to purchase their manufactured homes in cash or use riskier alternatives such as rent-to-own. In many instances, they may be shut out of homeownership altogether.

The Federal Housing Administration (FHA) and Ginnie Mae—government agencies that provide mortgage insurance and loan guaranty to help homebuyers to secure financing—issued a joint request for input (RFI) in July. The RFI focused on identifying hurdles to the use of their current Title I Manufactured Housing Program, which insures personal property loans but is virtually unused. In response, The Pew Charitable Trusts on Sept. 26 submitted a comment letter that suggests the government update and align Title I with FHA’s Title II program, which already provides an important source of credit to manufactured home mortgage borrowers. Updates could improve access to safe and affordable financing options for buyers who want to use a personal property loan.

More than half of manufactured home financing applications are denied

Applications for manufactured home financing are denied far more frequently than applications for site-built home financing. In 2021 lenders denied 54% of completed applications for financing—those that included all the information needed for underwriting—to purchase a manufactured home. For site-built home buyers, the rate was just 7%. These rates have remained unchanged from the previous denial rates research, when Pew and the University of North Carolina’s Center for Community Capital (UNC) completed an extensive analysis of 2018-19 manufactured home denial rates. That research demonstrated that manufactured homes are more likely to be purchased using cash than are site-built homes (37% vs. 11%), in part because of lack of financing.

This year, Pew used the same methodology as the earlier Pew-UNC study with updated 2021 national data from the Home Mortgage Disclosure Act (HMDA) database, a national repository of information on mortgages from point of application through origination or denial. For manufactured homes, personal property loans have the highest denial rates at 64%, but even traditional mortgages were denied 40% of the time. (See Figure 1.).