Topic: Manufactured Homes
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Does Illinois require that a mobile home title be surrendered to the Illinois Secretary of State when a lender extends a mobile home loan — or is that a Fannie Mae/Freddie Mac requirement?
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A certificate of title for a mobile (or manufactured) home does not have to be surrendered if your security interest in the home will be perfected by a UCC Financing Statement, essentially treating the home as personal property. However, if your security interest in the home will be perfected by a mortgage on the mobile…
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We have a borrower with a contract to purchase a modular home from a manufacturer. The Loan Estimate indicated that the purpose of the loan was for a purchase. However, we recently learned that the borrower has already acquired title to the land where the modular home will be located from their parents by quitclaim deed. Both the modular home and the land will be collateral for the loan. No funds will be disbursed at the closing. The manufacturer will be paid as the units of the modular home are delivered. Can we change the stated purpose of the loan on the Closing Disclosure to “construction,” since the borrower is not purchasing the land?
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In our view, the loan purpose should be identified as a purchase on the Closing Disclosure (CD). The TRID rules require lenders to identify one of four possible loan purposes in the Loan Estimate (LE) and CD: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance…
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If a closed-end loan has a combined purpose to purchase a manufactured home and to construct a basement for the home, what should we list as the loan’s purpose on the Loan Estimate? Does it matter if the loan will be structured as a short-term loan with three separate advances? The manufactured home will secure the loan.
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In our view, you should identify the loan as a purchase loan, regardless of how it is structured. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. A purchase loan is one made to finance the acquisition…
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What should we list as the loan purpose on the Loan Estimate under the TILA-RESPA Integrated Disclosure (TRID) rules for a closed-end loan to purchase a manufactured home that will be attached to land? The borrower already owns the land, and the loan proceeds will be used to purchase a modular manufactured home to be placed on the land, but a portion of the loan also will be used to build a basement, porch and garage for the manufactured home. The loan will be secured by both the manufactured home and the land it will sit on. Is this a purchase loan or a construction loan?
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In our view, the purpose of this loan should be identified as a purchase. The TRID rules require lenders to identify just one of four possible loan purposes in the Loan Estimate: (1) purchase, (2) refinance, (3) construction, or (4) home equity. We believe that “construction” is inapplicable for two reasons. First, the purpose of construction is…
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A customer would like a loan to purchase a mobile home that will be affixed to his land and to pay off an existing loan secured by the land. The loan amount will be the purchase price of the mobile home plus the payoff amount of mortgage, which is held by another bank. Where do we list the land mortgage payoff amount on the Calculating Cash to Close table on the Loan Estimate?
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For a purchase transaction, we believe that the payoff amount for the land mortgage loan is part of the calculation used to determine the amount that should be placed on the “Closing Costs Financed” line of the Loan Estimate’s Calculating Cash to Close Table. To calculate “Closing Costs Financed” for a purchase transaction (other than…
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We are making a higher-priced mortgage loan for the purchase of a mobile home that will not be located in a mobile home park. The borrower is leasing the underlying land, which will not secure the loan. The mobile home will be taxed as real property on the landowner’s tax bill, so the borrower will not owe any property taxes. Are we still required to escrow for taxes? We will be setting up an escrow account for property insurance payments.
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We recommend setting up an escrow account for the borrower, even though the escrow account will not be used to collect funds for property tax payments. Before consummating a higher-priced mortgage loan, the creditor must establish an escrow account “for payment of property taxes and premiums for mortgage-related insurance required by the creditor.” We believe…
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Does Illinois have an established process for affixing and establishing a manufactured home as real estate? For example, Missouri has a Manufactured Home Affidavit that is recorded with the deed to the real estate.
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Yes, there is a procedure for voluntarily converting a manufactured home from personal to real property in the Illinois Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act. The manufactured home must be permanently fixed to land and cannot be located in a mobile home park. A statutory “affidavit of affixation” must…
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We are funding the purchase of a mobile home not attached to dirt. We understand that because the mobile home is not attached to real property, the loan is not subject to the TILA-RESPA integrated disclosure (TRID) requirements, but do we have to send any early disclosures, such as a Good Faith Estimate?
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No, a mortgage secured by a mobile home not attached to real property is not subject early disclosures. However, under Regulation Z, you should provide an interest rate and payment summary, together with a specialized disclosure required for non-TRID mortgage loans prior to consummation of the loan. Additionally, other Regulation Z disclosures required for loans…
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We refinanced a mortgage loan that is secured by a manufactured home and the underlying land. The original lender had taken a mortgage in the underlying land, notated its lien on the manufactured home’s title, and filed a UCC-2 form for the manufactured home. That lender released its mortgage and removed its lien from the title, but it has not released its UCC lien. We have had no luck working with the lender — they appear not to understand (they just keep resending the mortgage release instead of a UCC release). Can the borrower file something to release the UCC lien?
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Yes, the borrower (or even your bank) may file a termination statement regarding the UCC lien, provided that the borrower is entitled to the termination, and, if your bank files it, the termination statement indicates that the borrower authorized the filing. Once a secured obligation has been satisfied, the UCC requires the secured party to…
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Can we impose higher interest rates and shorter loan terms on loans for manufactured homes? Or would this be considered redlining or disparate treatment?
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Yes, we believe that you may vary interest rates and loan terms for loans secured by manufactured homes, provided that these policies are rooted in valid business considerations that have been carefully documented. We recommend monitoring your manufactured home loans for signs of a disparate impact on protected classes and geographical areas (for example, where…