If you don’t make the payments for a loan you took out to buy a manufactured home, the lender might either repossess or foreclose the home depending on a few factors, like whether the home is classified as "personal" or "real" property.
However, most lenders (not all) offer loss mitigation options to those who are behind in their manufactured home loan payments.
What Is a Manufactured Home?
A “manufactured home” is a type of housing that typically has the following characteristics:
- The home is built in a factory or similar facility and then delivered to a home site. On the other hand, a “stick-built” home is built on-site from the ground up.
- A manufactured home is structurally complete when it comes out of the factory and is then transported to its new owner in one or more sections.
- A manufactured home is constructed on a permanent chassis with a tongue, axles, and wheels for transport. Once the home arrives at its site, it is usually secured to the ground or placed on a foundation, and the tongue, axles, and wheels are removed.
Manufactured Homes: Personal Property You Can Convert to Real Property
Before you can understand whether the lender will take a home through repossession or foreclosure, you need to understand a little bit about how manufactured homes are legally categorized.
Manufactured Homes Are Initially Considered Personal Property.
A manufactured home is considered personal property, like a car, when delivered. In most states, the home’s ownership is evidenced by a certificate of title, like a motor vehicle, with security interests noted on the title.
In states that don’t use a certificate of title, a security interest in a manufactured home is perfected (made) through a UCC filing. While a manufactured home is initially considered personal property, a homeowner can sometimes change the classification from personal property to real property by taking certain steps.
State Law Governs How and Whether You Can Convert a Manufactured Home to Real Property
Most states have laws describing the procedures for changing a manufactured home’s classification from personal property to real property. A few states have statutes that specify whether a manufactured home is considered personal property or real estate in credit transactions, while others have a statutory scheme that establishes criteria for taxing the home as real property. Other states don't have laws covering the matter.
How to Convert a Manufactured Home to Real Property (Generally)
Typically, a homeowner must take certain steps to change a manufactured home’s classification from personal property to real property. First, the manufactured home usually has to be permanently affixed to owned land. Many states also require the homeowner to own the land that the manufactured home sits upon. Some states, however, permit an owner to convert a manufactured home to real property once the home is permanently affixed to land, even if the land is leased. However, the lease usually has to be for a minimum specified period of time.
Ordinarily, state law also lists several other requirements that the homeowner must meet to convert a manufactured home to real property, such as:
- removing the tongue, axles, and wheels
- installing tie-downs
- surrendering the certificate of title to the appropriate revenue commission (or surrendering the manufacturer’s certificate of origin and filing an affidavit in the land records), and
- taking whatever other steps the state requires to have the manufactured home assessed as real estate.
Will You Face a Repossession or Foreclosure?
If you stop making the loan payments for a manufactured home, the lender can get ownership of the home through either repossession or foreclosure. Again, the process that the lender will use generally depends on whether the home is classified as personal or real property. If the home is classified as personal property, the lender will repossess the home. But if the manufactured home is considered part of the real property, the lender will foreclose.
Repossession of Manufactured Homes
State law governs the repossession process for manufactured homes. The repossession, depending on what the law allows, might be through self-help repossession (a peaceable retaking without a court order), voluntary repossession, or through a judicial process (called “replevin”).
Self-help repossession. With self-help repossession, the lender doesn’t have to file a lawsuit in court before taking possession of the manufactured home. The lender sends a repossession agent out to take the manufactured home away. This process isn’t very practical when it comes to manufactured homes. It’s almost impossible to repossess a manufactured home without breaching the peace, which isn’t allowed during self-help repossession, or without taking the borrower’s other personal items, like furniture and other personal property in the home.
Voluntary repossession. In a voluntary repossession, the homeowner voluntarily surrenders the home to the lender.
Replevin. Sometimes, like when the homeowner objects or raises a defense to repossession, the lender has to get a court order from the appropriate state court to repossess a manufactured home. The lender files a lawsuit in court and asks the court to grant an order for repossession. The lender then repossesses the manufactured home under that order.
Foreclosure of Manufactured Homes
If a manufactured home is attached to real estate in such a way that it's treated as a part of the real property under applicable state law, the lender will foreclose. The foreclosure could be judicial or nonjudicial, depending on state law and the circumstances.
Options to Avoid Foreclosure or Repossession of Your Manufactured Home
If you’re behind in the loan payments for your manufactured home, you might be able to avoid a foreclosure or repossession by working out a deal (a loss mitigation option) with your lender to either keep the home or exit the property. A few of your options might include a:
- forbearance agreement
- repayment plan
- loan modification
- short sale, or
- deed in lieu of foreclosure.
Forbearance Agreement: Reduce or Suspend Your Payments
With a forbearance agreement, the lender agrees to reduce or suspend your loan payments for a specific amount of time. In exchange, you must resume making your payments at the end of the forbearance period. You'll also have to make up the missed amounts. Generally, the lender will allow you to pay the past-due amounts:
- in a lump sum
- by adding an extra amount to your regular payments each month until the entire skipped amount is repaid, or
- by completing a loan modification (see below) in which the lender adds the unpaid amounts to the loan balance.
The terms of forbearance agreements, including how long a forbearance will last and repayment provisions, vary widely from lender to lender.
Repayment Plan: Get Caught Up Over Time
If you’ve missed some loan payments due to a temporary hardship, a repayment plan will spread the past-due amount over time, typically three to six months. You'll pay a portion of the overdue amount along with your regular payment amount each month. At the end of the repayment period, you will be current on your payments and resume paying the normal monthly payment amount.
Example of how a repayment plan works. Jay is three months behind on his monthly payments of $800 a month (a total of $2,400 delinquent). The lender agrees to let him pay $400 extra each month over the next six months to get current on the loan. So, Jay has to come up with $1,200 monthly for six months. At the end of the repayment period, he'll resume making regular monthly payments of $800.
Loan Modification: Adjusting Your Loan Terms
A "loan modification" is a permanent loan restructuring where one or more of the terms are changed to provide a more affordable payment. With a loan modification, the lender might agree to do one or more of the following to reduce your monthly payment:
- lower the interest rate
- convert a variable interest rate to a fixed interest rate
- add delinquent amounts to the balance of the loan, or
- extend of the term of the loan (say, from 30 years to 40 years).
Generally, to get a loan modification, you must:
- show that you can't make your current payment due to a financial hardship, but you have sufficient income to pay a modified amount
- complete a trial period to demonstrate you can afford the new monthly amount, and
- provide all required documentation, like pay stubs, tax records, and bank statements, to the servicer for evaluation.
Lenders usually offer different types of modifications depending on what type of loan you have and your circumstances. For instance, if you have a Fannie Mae or Freddie Mac loan, you might qualify for a Flex Modification. Lenders also typically offer in-house (“proprietary”) modifications. Loans on manufactured homes are usually eligible for modification under these programs. However, sometimes, the manufactured home and the land must be classified as real property under applicable state law to qualify.
Short Sales and Deeds in Lieu of Foreclosure: Ways to Give Up the Home
If you want to give up the property, you might be able to complete a short sale or deed in lieu of foreclosure.
Short sale. A "short sale" is when the lender permits the homeowner to sell the home for an amount that falls short of the amount owed. In return, the lender agrees to release the lien securing the loan.
Deed in lieu of foreclosure. A "deed in lieu of foreclosure" is a transaction where the homeowner voluntarily transfers title of the property to the lender. Again, in return, the lender agrees to release the lien securing the debt.
Getting Help
To find out what options are available to you, if any, call your loan servicer. If you’re facing a foreclosure or repossession of your manufactured home and want to find out if you have any defenses to the action, consider talking to a lawyer. If you need more information about any of the loss mitigation alternatives discussed in this article, talk to a HUD-approved housing counselor.
About the author:
Amy Loftsgordon is a legal editor at Nolo, focusing on foreclosure, debt management, and personal finance. She writes for Nolo.com and Lawyers.com and has been quoted by news outlets that include U.S. News & World Report and Bankrate. Amy received a B.A. from the University of Southern California and a law degree from the University of Denver.