MORTGAGES Fannie Mae tightens loans for manufactured homes

The new requirements will make the homes unaffordable for many.
WASHINGTON (AP) -- David Burnett thinks business is about to get worse for his already slumping manufactured home dealership.
That's because mortgage giant Fannie Mae, in response to a rising number of delinquencies and foreclosures, is making it tougher to get manufactured home loans. The company now requires a 10 percent down payment for 30-year mortgages on such homes, plus a fee of 0.5 percent of the loan amount.
Previously, those who qualified could put no money down, while others put down no more than 3 percent. No fee was required.
For those who cannot afford 10 percent, Fannie Mae has introduced a 20-year loan requiring a 5 percent down payment. However, monthly payments are higher.
Critics say the changes could price some would-be home owners, especially low-income families, out of the market.
Dealer worries
That would hurt dealers like Burnett, who have already been affected by the glut of recently built, repossessed manufactured homes.
"It's putting another nail in the coffin," said Burnett, who owns the Deep South Home Gallery in Montgomery, Ala. He said seven of his area's 13 dealers have gone out of business over the past two years.
"Business was slow then, and now I expect it to be slower," he said.
Manufactured homes are built in factories and assembled on building sites. They include mobile homes, though many manufactured dwellings have characteristics found on traditional single-family homes -- pitched roofs, decks and porches.
The Department of Housing and Urban Development says mobile or manufactured homes account for one-third of all new single-family home sales. There are about 7.2 million such homes, many in rural areas and the South.
The average sale price is roughly $49,000, compared to about $164,000 for a traditional single-family home, according to the Manufactured Housing Institute, an industry trade group.
Cause of action
According to Fannie Mae's Deborah Tretler, recent lending changes came after many home sellers and lenders in the late 1990s extended loans to buyers with poor credit histories or not enough income to pay their mortgages, industry experts say.
"We don't serve borrowers well when it is easy for a borrower to get into a home under very flexible terms, only to have them lose their home, their credit ruined and their homeownership dreams turned into a nightmare," said Tretler, vice president of single-family homes.
Lance George, research associate for the private Housing Assistance Council, said of the changes: "In some remote rural areas, that will knock people out" of the housing market.
But he also said, "It's not all Fannie Mae's fault. It's the industry. They let a lot of the retailers go wild and give loans to everyone."
Fannie Mae is shorthand for the Federal National Mortgage Association, a publicly held company chartered by Congress 30 years ago to keep a steady supply of cash in the home mortgage market. It now is the nation's largest source of money for mortgages, with a large number of loans going to first-time home buyers.