NCUA Changes Gears; Longer-Maturity Loans Permissible on Manufactured Housing

ALEXANDRIA, Va.-NCUA reconsidered its previous legal opinion and has stated that federal credit unions may make loans secured by manufactured homes for the same maturities as residential real estate loans if they meet the requirements. Rosemary Hardiman of the Hardiman & Hardiman law firm in Springfield, Va., raised the issue at the behest of San Antonio Federal Credit Union. In the legal opinion letter (03-0934), NCUA Associate General Counsel Sheila Albin stated that federal credit unions generally can not make loans exceeding 12 years with certain exceptions (residential real estate, second mortgages, home improvement, and mobile homes). “Specifically, the [FCU] Act provides that loans for residential real estate and mobile homes will have maturities of 30 and 15 years respectively but grants the NCUA Board the authority to set a longer maturity term. Id.,” she wrote. “NCUA’s loan regulation provides loan maturities for residential real estate loans and mobile homes respectively of 40 and 20 years.” However, she added that NCUA no longer equates mobile homes with manufactured homes because of the relative permanency of a manufactured home on the property and treatment by the Internal Revenue Code. “We believe changes in the housing industry support distinguishing a manufactured home permanently affixed to the ground from a mobile home for purposes of our lending regulation,” Albin wrote. “Your letter discusses significant changes in the manufactured housing industry within the last several years, including enhancements to quality and standards for construction.” In fact, nearly 30% of all new home construction is in manufactured homes, according to the Federal Home Loan Mortgage Corporation, she pointed out. NCUA’s requirement for real estate loans is that it be titled as real property and, in the instance where the land the home is located is leased, the credit union should obtain an agreement with the landowner. Additionally, the term of the lease should be at least as long as the term of the loan. Albin also recommended that federal credit unions evaluate any additional risks and safety and soundness issues related to long-term loans on manufactured housing. “I think this really indicates that we are trying to respond as times change,” said NCUA Board Member Deborah Matz, who strongly supported the change in the interpretation. She added that she has been “a strong advocate for credit unions to help people get into their first homes.” Matz said that San Antonio Federal Credit Union is in an area where some of their members could become first-time homeowners if they could obtain affordable financing for a manufactured home; some residents place manufactured homes on relative’s property to save money. She explained that the average manufactured home is around $51,000. “It will both help people in their area and it’s good for business,” Matz said. San Antonio Federal Credit Union ($1.6 billion in assets) CEO Jeff Farver was unavailable for comment as of deadline. [email protected]