Yes, we believe that a loan secured by a mobile home used as a residence must comply with Regulation Z’s HPML escrow and ATR requirements, even if not affixed to land. However, we do not believe a loan secured by a mobile home needs to comply with Regulation Z’s HPML appraisal requirements.

Under Regulation Z, the term “dwelling” includes a mobile home used as a residence. The HPML requirements apply to a closed-end consumer credit transaction secured by the consumer’s principal dwelling if the annual percentage rate exceeds the average prime offer rate as outlined below. Additionally, Regulation Z’s ATR requirements apply to any consumer credit transaction secured by a “dwelling.” Consequently, we believe the HPML escrow and ATR requirements apply to a loan secured by a mobile home used as the consumer’s principal dwelling.

However, the terms “mobile home” and “manufactured home” are sometimes conflated, and different HPML appraisal requirements apply to mobile homes and manufactured homes.

Under Regulation Z, the term “mobile home” is not defined, but it appears alongside the terms boats, trailers, recreational vehicles, and campers. Regulation Z exempts transactions secured by a mobile home from its HPML appraisal requirements.

On the other hand, the term “manufactured home” means “a structure, transportable in one or more sections . . . which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained in the structure.” The term specifically does not include “any self-propelled recreational vehicle.”

A transaction secured by a manufactured home (and not by the underlying land) is exempt from the HPML appraisal requirements, but valuation requirements apply in lieu of the appraisal requirements. For a transaction secured by a used manufactured home, the creditor must provide the consumer with a copy of a cost estimate or valuation of the manufactured home no later than three business days prior to consummation of the transaction. For a transaction secured by a new manufactured home, the creditor can instead provide a copy of the manufacturer’s invoice if the date of manufacture is no earlier than eighteen months before the creditor's receipt of the consumer’s credit application.  

You would show compliance with the HPML escrow requirements in the same way that you would for other covered loans — you must establish an escrow account before consummation and keep the escrow account open until it meets Regulation Z’s conditions for terminating an escrow account for an HPML. Note that an escrow account need not be established for a transaction to finance the initial construction of a dwelling.

Similarly, you should show compliance with the ATR requirements as you would for other covered loans, by either making a reasonable and good-faith determination of a consumer’s ability to repay at or before consummation or by making a “qualified mortgage” that is presumed to comply with the ATR requirements.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.2(a)(19) (“Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes an individual condominium unit, cooperative unit, mobile home, and trailer, if it is used as a residence.”)

• Regulation Z, Official Interpretations, Paragraph 2(a)(19), Comment 2 (“Mobile homes, boats, and trailers are dwellings if they are in fact used as residences, just as are condominium and cooperative units. Recreational vehicles, campers, and the like not used as residences are not dwellings.”)

• Regulation Z, 12 CFR 1026.35(a)(1) (“‘Higher-priced mortgage loan’ means a closed-end consumer credit transaction secured by the consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:

(i) By 1.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that does not exceed the limit in effect as of the date the transaction’s interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac;

(ii) By 2.5 or more percentage points for loans secured by a first lien with a principal obligation at consummation that exceeds the limit in effect as of the date the transaction’s interest rate is set for the maximum principal obligation eligible for purchase by Freddie Mac; or

(iii) By 3.5 or more percentage points for loans secured by a subordinate lien.”)

• Regulation Z, 12 CFR 1026.43(a) (“This section applies to any consumer credit transaction that is secured by a dwelling, as defined in § 1026.2(a)(19), including any real property attached to a dwelling. . . .”)

• Regulation Z, 12 CFR 1026.35(c)(2) (“Unless otherwise specified, the requirements in paragraph (c)(3) through (6) of this section do not apply to the following types of transactions: (i) A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c . . . (iii) A transaction secured by a mobile home, boat, or trailer. (iv) A transaction to finance the initial construction of a dwelling. . . .”)

• Regulation Z, 12 CFR 1026.35(c)(2)(viii) (“Unless otherwise specified, the requirements in paragraph (c)(3) through (6) of this section do not apply to the following types of transactions: . . . (viii) A transaction secured by:

(A) A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph (c)(3)(i) of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or

(B) A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction —

• (1) For a new manufactured home, the manufacturer's invoice for the manufactured home securing the transaction, provided that the date of manufacture is no earlier than 18 months prior to the creditor's receipt of the consumer's application for credit;
• (2) A cost estimate of the value of the manufactured home securing the transaction obtained from an independent cost service provider; or
• (3) A valuation, as defined in § 1026.42(b)(3), of the manufactured home performed by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes.”)

• Regulation Z, 12 CFR 1025.35(c)(1)(iii) (“Manufactured home has the same meaning as in 24 CFR 3280.2.”)

• Manufactured Home Construction and Safety Standards, 24 CFR 3280.2 (“Manufactured home means a structure, transportable in one or more sections, which in the traveling mode is 8 body feet or more in width or 40 body feet or more in length or which when erected on-site is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained in the structure. This term includes all structures that meet the above requirements except the size requirements and with respect to which the manufacturer voluntarily files a certification pursuant to § 3282.13 of this chapter and complies with the construction and safety standards set forth in this part 3280. The term does not include any self-propelled recreational vehicle. Calculations used to determine the number of square feet in a structure will include the total of square feet for each transportable section comprising the completed structure and will be based on the structure's exterior dimensions measured at the largest horizontal projections when erected on site. These dimensions will include all expandable rooms, cabinets, and other projections containing interior space, but do not include bay windows. Nothing in this definition should be interpreted to mean that a manufactured home necessarily meets the requirements of HUD's Minimum Property Standards (HUD Handbook 4900.1) or that it is automatically eligible for financing under 12 U.S.C. 1709(b).”)

• Regulation Z, 12 CFR 1026.35(b)(1) (“Except as provided in paragraph (b)(2) of this section, a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor, such as insurance against loss of or damage to property, or against liability arising out of the ownership or use of the property, or insurance protecting the creditor against the consumer’s default or other credit loss. For purposes of this paragraph (b), the term “escrow account” has the same meaning as under Regulation X (12 CFR 1024.17(b)), as amended.”)

• Regulation Z, 12 CFR 1026.35(b)(2)(i)(B) (“Notwithstanding paragraph (b)(1) of this section: . . .  (i) An escrow account need not be established for: . . . (B) A transaction to finance the initial construction of a dwelling. . . .”)

• CFPB Small Entity Compliance Guide, TILA Higher-Priced Mortgage Loans (HPML) Escrow Rule (January 2021), page 6–7 (“Section 1 – Introduction. The TILA HPML Escrow Rule has three main elements:

1. After you originate a higher-priced mortgage loan secured by a first lien on a principal dwelling, you must establish and maintain an escrow account for at least five years regardless of loan-to-value ratio. You must maintain the escrow account until one of the following occurs: 1) the underlying debt obligation is terminated or 2) after the five-year period, the consumer requests that the escrow account be canceled. However, if you are canceling the escrow account at the consumer’s request, the loan’s unpaid principal balance must be less than 80 percent of the original value of the property securing the underlying debt obligation, and the consumer must not be currently delinquent or in default on the underlying obligation.
    
2. You do not have to escrow for insurance premiums for homeowners whose properties are located in condominiums, planned unit developments, and other common interest communities where the homeowners must participate in governing associations that are required to purchase master insurance policies.
    
3. If you operate in a rural or underserved area and meet certain asset size and other requirements, you may be eligible for an exemption from this rule for certain loans you hold in portfolio.”)

• CFPB Small Entity Compliance Guide, Ability-to-Repay and Qualified Mortgage Rule (April 2021), page 16 (“Section 3.1 – Determining ATR. The general ATR standard requires a creditor to make a reasonable and good-faith determination of a consumer’s ability to repay at or before consummation of a covered mortgage loan. 12 CFR 1026.43(c)(1). However, the ATR/QM Rule does not provide comprehensive underwriting standards for creditors to use when making such a determination. As long as creditors consider the eight factors discussed in Section 3.2 and verify the information that they relied on when considering those factors as discussed in Section 3.3, creditors are permitted to develop their own underwriting standards and make changes to those standards over time in response to empirical information and changing economic and other conditions.”)

• CFPB Small Entity Compliance Guide, Ability-to-Repay and Qualified Mortgage Rule (April 2021), page 18–19 (“Section 3.2 – Eight ATR underwriting factors. To satisfy the general ATR standard, a creditor must consider the following eight factors at or before consummation of a covered mortgage loan:

1. The consumer’s current or reasonably expected income or assets (other than the value of the dwelling and attached real property that secures the loan) that the consumer will rely on to repay the loan. . .
    
2. The consumer’s current employment status (if a creditor relies on employment income when assessing the consumer’s ability to repay). . .
    
3. The monthly mortgage payment for the loan that the creditor is underwriting. . .
    
4. The monthly payment on any simultaneous loans secured by the same dwelling. . .
    
5. Monthly mortgage-related obligations. . .
    
6. The consumer’s current debts, alimony, and child-support obligations. . .
    
7. The consumer’s monthly debt-to-income (DTI) ratio or residual income. . .
    
8. The consumer’s credit history.”)

• CFPB Small Entity Compliance Guide, Ability-to-Repay and Qualified Mortgage Rule (April 2021), page 22–23 (“Section 3.3 – Verifying information using reasonably reliable third-party records. A creditor generally must verify the information it relies on when determining a consumer’s repayment ability using reasonably reliable third-party records. 12 CFR 1026.43(c)(3) and (4). The ATR/QM Rule defines third-party records to include, among other things, records prepared by an appropriate person other than the consumer, the creditor, the mortgage broker, or the creditor’s or mortgage broker’s agent. 12 CFR 1026.43(b)(13)(i).”)

• CFPB Small Entity Compliance Guide, Ability-to-Repay and Qualified Mortgage Rule (April 2021), page 15 (“Section 2.3 – Record retention. The ATR/QM Rule requires creditors to retain evidence of compliance with the ATR/QM Rule, including the prepayment penalty limits, for three years after consummation. 12 CFR 1026.25(c)(3). Creditors may want to keep records for a longer period, and nothing in the Rule prohibits them from doing so.”)

• CFPB Small Entity Compliance Guide, Ability-to-Repay and Qualified Mortgage Rule (April 2021), page 28 (“Section 4 – Qualified mortgages. Mortgage loans that satisfy the criteria for one or more categories of QMs set forth in the ATR/QM Rule are presumed to comply with the Rule’s ATR requirements. If a QM is higher priced (as defined in the Rule) and is not a Seasoned QM, the presumption of compliance is rebuttable. Otherwise, the presumption of compliance is conclusive (i.e., the QM has a safe harbor from liability under the Rule). The presumptions of compliance are discussed in Section 4.1.”)