When Is Conventional Financing Available for Manufactured Homes on Leased Land?

Paul Barretto

Community Land Trusts (CLTs) are non-profit organizations that create and maintain affordable housing. CLTs acquire land and renovate the existing home or build a new one for sale to borrowers who qualify for their housing program. The home buyer is able to purchase the home at a below-market price because the attached land is leased back to them under a long-term ground lease, usually a 99-year renewable term administered by the CLT. It’s a great deal for the homebuyer because they maintain rights to the land and own the home at a price much less than comparable homes where the land and home are owned outright.

However, the homeowner is bound by certain restrictions on the deed if they decide to sell the home. For example, if they sell the home they would not get all the equity that had accumulated during their ownership as the home was sold to them at a below-market price. Furthermore, they may be required to sell the home to potential buyers who are qualified under the CLTs requirements, such as families under a certain income limit that have completed a home buyer education program. These resale restrictions are designed to keep the homes in CLTs permanently affordable but allow the homeowner the benefits of ownership.

Most homes are traditionally built on-site, but recently there has been proof of concept, test, and learn efforts to use the benefit and efficiencies of manufactured housing to further the affordable nature of CLTs. This is significant because the financing used to purchase these homes is standard conventional fixed-rate financing that is provided by local lenders then sold on the secondary market to Fannie Mae or Freddie Mac, also known as government-sponsored enterprises, or GSEs. Technically, manufactured homes on leased land are considered personal property, or chattel, and the financing available to homeowners is at a higher interest rate and terms different than standard conventional financing. While the GSEs do not buy chattel loans, they do buy loans on homes in a community land trust.

As part of the Duty to Serve Rule, both GSEs are required to have specific plans to expand their manufactured housing and affordable housing efforts. They are working with the Grounded Solutions Network, the trade association for community land trusts, the manufactured housing industry, and various affordable housing non-profit organizations to develop a solution allowing manufactured homes in a community land trust to be financed with 30 year fixed rate affordable conventional loans.

If these test and learn pilots prove successful, it would open the doors for the placement of more manufactured homes in community land trusts, allowing the growth of both manufactured housing and community land trust business in support of affordable housing.

For more information on Community Land Trusts and manufactured housing, contact the author Paul Barretto at [email protected].


About the Author

Paul Barretto is the Executive Director for LearnMH where he is responsible for the organization’s growth and strategic development as a resource for positive change in the offsite factory-built housing industry. He is recognized as a leader and influencer in factory-built housing based on his work in affordable and manufactured housing.

Prior to his roles with LearnMH and Manufactured Housing Initiatives, Paul spent 20 years at Fannie Mae in various roles in its Single-Family and Affordable Housing divisions including managing and developing its mortgage products as well as executing various strategic initiatives.

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About Paul Barretto

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