New York Governor Kathy Hochul signed a long-awaited agreement state law designating constructed homes as real estate in December. Over the next eleven months, the question will be whether the newly enacted measure can deliver on the promised mortgage-style financing or get stuck due to legislative regulations.
Regulators, lenders and manufactured housing advocates will spend this year figuring out how to transform homes that have long been effectively treated as vehicles into assets that look, behave and are financed like any residential home.
The stakes for New York’s new manufactured housing law are high in the context of a serious — and worsening — housing affordability crisis. New York has long struggled with affordability and New York City has elected a new mayor partly because of this.
Until last year, New York was one of the few states without a codified law treating industrial properties as real property.
“It was a political battle that lasted 15 years,” said James Bopp, vice president Planet Home Loans and founder and president of the New York Mortgage Bankers Association, said in an interview with The builder’s newspaper.
Against this backdrop, manufactured housing is one of the few segments that still offers relatively low-cost housing. Congress recently emphasized its role by passing the Affordable HOMES Act, which aims to reduce duplication of regulation and lower unit costs.
What the law does
Hochul signed the Land-Home Property Act into law in December with little fanfare.
However, it is part of her multi-year efforts to boost affordable housing in the state. In her recent State of the State address, Hochul reiterated that communities cannot reach their full potential without an ample supply of affordable housing.
“For too long, overly burdensome regulations have made it too difficult not just to build homes, but the places where people work and the infrastructure on which our future depends,” she said. “And that’s why four years ago I made the pledge to challenge the status quo, cut red tape and pave the way for building, building and more building.”
The state past what she calls the most important pro-housing legislation in fifty years.
Part of that package includes $50 million for a program called Move-In NY to deploy CrossMods, built by Claytonon vacant residential lots.
The first three homes are in Schenectady, Syracuse and the city of Newcomb, and the program is designed to scale to more than 200 additional homes statewide.
Clayton’s CrossMods are built to resemble conventional single-family homes and meet the U.S. Department of Housing and Urban Development’s Manufactured Home Construction and Safety Standards. They also meet Fannie Mae and Freddie Mac design criteria, giving homebuyers access to GSE-backed mortgage financing.
The new manufactured housing law covers homes on wheels (i.e. mobile homes). The challenge with traditional mortgage financing lies in its definition and design: it is mobile.
Add houses with wheels to the mix
Under the new law, a manufactured home does not gain real estate status until the owner meets a checklist of requirements. The house must be permanently attached to a foundation, connected to utilities, and either on land owned by the homeowner or on leased land with a recordable lease and written permission from the landowner.
Owners must then file an Affidavit of Attachment with the county records office and complete a New York State Department of Motor Vehicles process to surrender or confirm the old title. Once remodeled, the home can be sold, mortgaged, and foreclosed as a site-built home, and the DMV may not issue a new title for that unit.
Government agencies will establish regulations that define technical standards for foundations and utility connections. They will prepare official forms for affidavits of affirmation. Agencies will work with the DMV, county clerks and local assessors on home remodeling procedures. They will host training for title companies, lenders and local officials. The training will teach local officials to treat converted homes uniformly in loan files, tax rolls and court records.
For lenders, this new regime for manufactured homes could be a welcome procedural change.
“I worked at a bank where we had a fireproof closet with all these manufactured home titles in it, and you had to combine this with the title policy on the property,” Bopp says.
He says once the mechanics of the new law are finalized, it will unlock access to 30-year fixed-rate agency funding statewide. That means banks and credit unions that now hold such loans in their portfolios can offer them through agency programs such as the Federal Housing Administration, Fannie Mae or Freddie Mac.
Independent mortgage bankers will also be able to compete in a market previously limited to banks and credit unions.
Supervisors have time to establish the rules
The law will not come into effect until December 12. Housing and industry groups are expected to pressure the state to write rules that are simple enough for individual owners to use, while giving lenders and investors confidence that remodeled homes meet secondary market standards.
By then, New York will know whether it has made a real move toward mortgage lending for manufactured home owners, or merely introduced a new set of forms on top of an old system.
New York’s move to reclassify certain manufactured homes as real estate joins a national push. If the change in state policy makes it easier for these homes to qualify for standard mortgage financing instead of more expensive real estate loans, it could transform a marginalized product into a mainstream affordability solution.
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