manufactured housing: not on a level playing field

You may have heard that Federal Reserve lowered interest rates again today. Today’s 50 basis point drop is the second rate decrease in just two weeks. Both were more than just a quarter percentage point, two. This is a substantial change in the lending environment.

For most borrowers, that is going to mean that the mortgages that they apply for in the next few months will cost less. 125 basis points represents tens of thousands of dollars over the lifetime of a 30 year mortgage. On a $100,000 home, such a drop represents $104 off the first month’s payment.

That same benefit probably won’t be going to people who want to buy mobile homes. That is because of some behind the scenes policy changes going on at Freddie Mac. Freddie Mac buys mortgages, including some mobile home mortgages. They tend to focus on the safest manufactured housing loans — those made on homes designated as real property. They are not the only buyer out there, but they are large enough to have a big impact upon the market.

Freddie plans to add a “delivery fee” \of 50 basis points on March 1st, 2008. That means that they will charge one half of one percent of the loan amount to lenders that want to sell their mortgages to Freddie. Because Freddie already charges 50 basis points for manufactured housing, it will mean a 1 percent penalty on manufactured housing mortgages.

Even worse, Freddie plans to institute a 75 basis point penalty for all mortgages with credit ratings below A-. That is going to include most manufactured housing mortgages. Not all of them, but most!

The Alabama Manufactured Housing Association is mighty upset about this.