Now that one in three homes is unaffordable for the average American, according to a recent report from Zillow, Freddie Mac is gearing up to begin financing ‘manufactured-housing communities’ – a.k.a. trailer parks.
The unit of the government-sponsored enterprise that funds apartment buildings is set to start working with lenders to move into the funding of ‘factory built homes.’
Basically, Freddie plans to offer commercial loans to the land owners on which the trailer parks reside. Those loans will be packaged into bonds along with the firm's more conventional apartment loans and sold onto the secondary market.
Freddie issued $3.9 billion of commercial-mortgage bonds linked to multifamily properties during the first quarter. Sales of the debt reached $28 billion in 2013.
‘Manufactured housing communities are an affordable housing option for many low-income individuals, especially in rural communities where affordable apartments are less prevalent,’ says David Brickman, executive vice president of Freddie Mac Multifamily, in a statement. ‘Our financing can help to increase debt capital to rural areas and help provide housing options for underserved populations. Nearly half of nation's manufactured homes are located in rural, non-metropolitan areas.’
Freddie says it will initially work with a few established MHC-experienced lenders in its Program Plus Seller/Servicers network and add additional lenders later this year.
Eligible properties will be stabilized, high quality, professionally managed communities owned by experienced operators.
The primary income securing the mortgage is from pad site rent paid by individuals and homeowners in the communities.
The loans will be securitized through Multifamily K-Deals along with conventional loans.
In an interview, Brickman told Bloomberg News that the total volume of originations linked to manufactured housing is expected to be relatively small – less than $1 billion per year.
Both Fannie and Freddie reportedly already fund such loans on a very limited basis – however, with this recent announcement it would appear that the firms plan to get into this side of the business in a much bigger way.