XI, 304.01: Manufactured Homes (08/24/03)
Any dwelling unit built on a permanent chassis and attached to a permanent foundation system is a “manufactured home” for purposes of Fannie Mae’s guidelines. Other factory-built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, is not considered manufactured housing and continues to be eligible under the guidelines stated in this Guide.
A. Property eligibility. The following eligibility criteria apply to any mortgage that is secured by a manufactured home.
• The manufactured home must be built in compliance with the Federal Manufactured Home Construction and Safety Standards that were established June 15, 1976 (as amended and in force at the time the home is manufactured) and that appear in HUD regulations at 24 C.F.R. Part 3280. Compliance with these standards will be evidenced by the presence of a HUD Data Plate that is affixed in a permanent manner near the main electrical panel or in another readily accessible and visible location.
• The manufactured home must be a one-family dwelling that is legally classified as real property. The towing hitch, wheels, and axles must be removed and the dwelling must assume the characteristics of site-built housing. The borrower must own in fee simple the land on which the manufactured home is situated, unless the manufactured home is located in a cooperative or condominium project. Mortgages secured by manufactured homes located on leasehold estates are not eligible.
• Multi-width manufactured homes may be located either on an individual lot or in a project development (i.e., cooperative, condominium, PUD, or subdivision). Mortgages secured by single-width manufactured homes are eligible for delivery to Fannie Mae only if the manufactured home is located in a Fannie Mae-approved subdivision, cooperative, condominium, or PUD project development.
• Project acceptance is required for multi-width manufactured homes located in a cooperative, condominium, or PUD project development. Project acceptance also is required if the property is a single-width manufactured home and the project is a PUD. In the case of cooperatives, both the land and dwelling must be owned by the cooperative. In the case of condominiums, both the land and dwelling must be subject to the condominium regime. For further information about project acceptance requirements, see Part XII.
• The manufactured home must be at least 12 feet wide and have a minimum of 600 square feet of gross living area. Further, the manufactured home must have sufficient square footage and room dimensions to be acceptable to typical purchasers in the market area. We do not specify other minimum requirements for size, roof pitch, or any other specific construction details.
• The manufactured home must be attached to a permanent foundation system in accordance with the manufacturer’s requirements for anchoring, support, stability, and maintenance. The foundation system must be appropriate for the soil conditions for the site and meet local and state codes.
• If the property is not situated on a publicly dedicated and maintained street, then it must be situated on a street that is community owned and maintained or privately owned and maintained. There must be adequate vehicular access and there must be an adequate and legally enforceable agreement for vehicular access and maintenance.
• The manufactured home must be permanently connected to a septic tank or sewage system and to other utilities in accordance with local and state requirements.
• We require the improvements to be completed, and fully paid for, when the mortgage is delivered to us. Specifically, the following must be completed: site preparation for delivery of the manufactured home, attachment of the manufactured home to the permanent foundation system, permanent connection to the septic or sewage system, and permanent connection to all necessary utilities (water, electricity, gas service, etc.). Exceptions to the foregoing may be only for minor items that do not affect the ability to obtain an occupancy permit (e.g., landscaping, a driveway, a walkway, etc.), subject to all requirements and warranties for new or proposed construction provided in our Part XI, Section 202. Mortgages secured by existing manufactured homes that have incomplete items, such as a partially completed addition or renovation, or defects or needed repairs that affect livability, are not eligible for purchase until the necessary work is completed and fully paid for.
B. Appraisal Standards. Fannie Mae will continue to require market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value. This means that the appraiser must develop and report in a concise format an adequately supported opinion of market value based on the sales comparison approach to value and further supported by the cost approach to value.
We believe that the unique property and appraisal issues associated with manufactured homes will be most appropriately addressed through supplemental analysis and reporting by the appraiser. We will require the appraiser to address more directly, in a standardized format, construction quality, property condition, market acceptance, indicated value by the cost approach, and support for the contributory value of the site.
The appraiser must report the results of a manufactured home appraisal on the Uniform Residential Appraisal Report (Form 1004) and on a Manufactured Home Appraisal Report Addendum (Form 1004C). Form 1004C expands upon the information required in Form 1004. For example, in the neighborhood section of our appraisal forms, the appraiser reports on general neighborhood trends, while the addendum focuses the appraiser on trends for manufactured homes. This information will help the lender better understand factors that may affect the value and marketability opinions and conclusions provided by the appraiser.
The use of Form 1004C will help to ensure that the appraiser inspected, considered, and/or reported (as applicable) the appropriate information including, but not limited to, the:
• manufacturer’s name,
• trade or model name,
• year of manufacture,
• serial number,
• certification label number(s) from either the HUD Data Plate or certification label(s),
• type of foundation and utility connections,
• detailed and supported cost approach,
• opinion of the market value of the site, and
• property’s conformity to the neighborhood.
In addition, the addendum will require the appraiser to make supplemental certifications to address his or her knowledge and expertise for the appraisal of manufactured homes.
Because the appraisal of a new manufactured home often is completed prior to delivery of the home, some of the information needed to complete Form 1004C may not be available at the time the appraisal is performed. That information might include the dealer invoice, the HUD Data Plate, certification label number(s), etc. For information not available at the time the appraiser is completing the appraisal forms, the appraiser may appraise the property subject to his or her receipt and review of the items as a condition of the appraisal. Prior to the delivery of the mortgage to us, lenders should obtain a “certification of completion” from the appraiser that includes the previously unavailable information (including a summary of the appraiser's analysis of any previously unavailable dealer invoice), and certifies that the requirements and conditions of the appraisal have been satisfied.
Other requirements include:
• For purchase money mortgages, the lender must provide the appraiser with a complete copy of the executed contract for sale of the manufactured home and land, or if the manufactured home and land are being purchased separately, the executed contract for each. In addition, the lender must provide the appraiser with a copy of the dealer invoice if the manufactured home is new. The appraiser must analyze the contract (and dealer invoice for new homes) and summarize his or her analysis in the appraisal report. The appraiser must not include in his or her value conclusion any non-realty items such as insurance, warranties, furniture, etc. Our appraisal report forms require the appraiser to develop an opinion of value solely for the real property as completed (consisting of the manufactured home, site improvements, and the land on which the home is situated) that is the subject of the appraisal.
• For new manufactured homes, not yet attached to the land (or not yet constructed), an appraisal may be based on either plans and specifications or an existing model home. In such cases, the lender must obtain a "certification of completion" before it delivers the mortgage to us. This certification must be completed by the original appraiser if possible or if not possible, by a substitute appraiser as provided for in Section 202. He or she must verify and state that the improvements were completed in accordance with requirements and conditions in the original appraisal report. The appraiser must also verify the information from the HUD Data Plate. Photographs of the completed improvements (attached to the permanent foundation) must be included.
• The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area. It must also have competitive utilities, street improvements, adequate vehicular access, and other amenities. Since amenities, easements, and encroachments may either detract from or enhance the marketability of a site, the appraiser must reflect them in his or her analysis and valuation. In addition, the appraiser must comment on them if the site has adverse conditions or is not typical for the neighborhood.
• The appraiser's opinion of value must be based on the characteristics of the subject property, including the site area. The appraisal report also must indicate whether or not the site is compatible with the neighborhood. The appraiser also should comment on the conformity of the manufactured home to other manufactured homes in the neighborhood. If the site or manufactured home is substantially non-conforming with the neighborhood such that a reliable appraisal cannot be made, the mortgage is not eligible for delivery to us.
• The appraiser must address both the marketability and comparability of a manufactured home by selecting comparable sales of similar manufactured homes, for example, multi-width homes to multi-width homes, etc. In order for the loan to be eligible for delivery to Fannie Mae, the appraiser must use a minimum of two comparable sales of similar manufactured homes. The appraiser may use either site-built housing or a different type of factory-built housing as the third comparable sale. When that is the case, the appraiser must explain why site-built housing or a different type of factory-built housing is being used for the third comparable sale, and make (and support) appropriate adjustments in the appraisal report.
• An appraiser who is unable to locate sales of manufactured homes that are truly comparable to the subject property may decide that it is appropriate to use either older sales of similar manufactured homes or sales of similar manufactured homes that are located in a competing market so that he or she can establish a baseline for the "sales comparison analysis" and determine sound adjustments to reflect the differences between the comparable sales that are available and the subject property. The appraiser should analyze and report a sufficient number of comparable sales to support his or her opinion of value (which may require the use of more than three comparable sales in some cases).
• The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of the home (although he or she may use this type of information as additional supporting documentation). If the appraiser is unable to develop a reliable appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible for delivery to us.
• In order to further enhance the quality of manufactured home appraisals and to provide the lender with additional information to improve its ability to underwrite the appraisal, we are requiring a detailed and supported cost approach to value for all manufactured home appraisals. The procedure involved in properly developing a detailed cost approach should improve the appraiser's ability to: (i) recognize differences in manufactured home construction quality; (ii) understand the differences between the comparable sales and the subject property; (iii) extract from the market appropriate adjustments for the sales comparison analysis; and (iv) identify sales of manufactured homes that are similar enough to the subject property to use as comparable sales.
The sales comparison and cost approaches to value are complementary for the valuation of manufactured housing and should support the final value conclusion. The cost approach must, at a minimum, contain the information indicated on the Manufactured Home Appraisal Addendum Report (Form 1004C). The appraiser may choose to report the results of the cost approach in one of several ways:
• using the Manufactured Home Appraisal Report Addendum (Form 1004C);
• using the Appraisal Form 1004, as long as the appraiser supplements Form 1004 with any needed information; or
• using a report form from a published cost service as an addendum to the appraisal report form.
Whatever format the appraiser chooses to report the cost approach, the information must be sufficient to allow the lender to replicate the cost figures and calculations. Form 1004C includes the minimum level of detail for the cost approach that the appraiser should provide on each appraisal report.
C. Sources of Manufactured Housing Data. Traditional appraisal data sources do not provide enough quality manufactured home data for the appraiser to develop a supportable and well-documented manufactured home appraisal. While sources such as MLS and public records are important, the appraiser must develop other data sources such as manufactured home dealers and construction companies/builders experienced in the installation of manufactured homes.
One important source of manufactured housing information is the N.A.D.A. Manufactured Housing Appraisal Guide. This publication lists general manufactured home depreciated replacement values based on original factory construction categories. The publication offers a step-by-step process for arriving at the average retail book value for a manufactured home and can be used to develop a cost approach. It is important to note that the N.A.D.A chart values assume the home is in average condition. The publication provides definitions for “excellent,” “good,” “average,” “fair,” and “poor” condition.
Another source of information is the Marshall & Swift Residential Cost Handbook. Marshall & Swift provides information that allows the user to arrive at an estimate of the cost of the manufactured home when new (i.e., replacement cost) based on, among other things, the construction quality. It provides an explanation of the items that allow the appraiser to support his or her conclusion of the overall construction quality of a manufactured home. This is important since condition and quality play a very important role in the value and marketability of manufactured homes.
When the appraiser completes the Manufactured Home Appraisal Report Addendum (Form 1004C), he or she must support his or her opinion about both the quality and the condition of the manufactured home. The N.A.D.A. Guide or the Marshall & Swift Handbook may be used as additional sources to provide support for the appraiser's conclusions about the quality and value of a manufactured home.
