Manufactured housing:

A home that the law still treats like a car

Febrary 2005
PDF Format

Executive Summary
We recommend

Report:
Repossession: Hauling off entire households
Foreclosure laws
Power of sale clauses reduce foreclosure protections
Repossession
Limits on self-help repossession
Right to cure and right to reinstate
Anti-deficiency laws
That is not the home I ordered
Recommendations

Sidebars:
Definitions
Key protections in foreclosure and key weaknesses of repossession
Deed of trust
Park tenancy
Drew Industries
Homestead Exemptions

Charts:
Foreclosure laws in six souhwestern states
Southwest states repossession laws
Right to cure default before repossession/Right to reinstate after repossession

Director
Reggie James

Author
Suzanne Henry

Editor
Kathy Mitchell

Design
Amanda Frayer

For more information, contact:
Suzanne Henry,
Policy Associate
512-477-4431 x121
shenry@consumer.org

Kathy Mitchell,
Research Coordinator
512-477-4431 x125
mitcka@consumer.org

Rafael Ayuso,
Media Director
512-477-4431 x114
ayusra@consumer.org

This report was funded in part by a grant from the Ford Foundation.

Click here to find out more about manufactured housing.

Executive Summary:

Most manufactured homes are financed using a personal property loan like a car or a couch. Consumers who finance their home with a personal property loan (also known as a chattel mortgage) do not have foreclosure protections similar to those available for real property home mortgages. When borrowers default on a personal property loan, the home can be repossessed like a car.

Foreclosure laws offer more protections for the consumer. Although state law varies, the lender is usually required to give borrowers notice of an impending foreclosure and ample opportunity to make up the default and keep their home.

We recommend:

We recommend additional protections to address the following limitations in state law for consumers purchasing manufactured homes: 

Deficiency judgments: Prohibit or limit a lender’s ability to sue a consumer for the unpaid deficiency balance on the loan. Lenders can now obtain a court judgment against a borrower for the remaining balance of the loan after subtracting the proceeds from the sale of the home. Limiting this practice will discourage lenders from loaning consumers more than the home is worth. Consumers with deficiency judgments are forced to continue paying for homes that they no longer own.

Self-help repossession: Manufactured homes financed by personal property loans can often be seized without going to court or without the cooperation of the home owner.

• Limit self-help repossession by requiring advanced notice of default on the home loan to give the borrower time to make up the defaulted payments and retain possession of the home.
• Require the lender to get a court order to repossess the home so that home owners who may have been a victim of fraud have the opportunity to challenge the default and repossession.

“Power of sale” clause: Some manufactured home purchasers borrow money using a regular mortgage contract or deed of trust — but they may be subject to a “power of sale” clause. Under a “power of sale” mortgage, the lender is not required to obtain a court judgment before foreclosing on a home. Require the option of judicial foreclosure for manufactured home mortgages containing a “power of sale” clause.

We recommend the following protections be expanded to all manufactured home loans:

• Right to cure: Give manufactured home borrowers time to make up or “cure” defaulted payments in order to stop the repossession process. Right-to-cure laws should be made applicable to all home loans to give consumers the opportunity to avoid repossession.
• Homestead exemptions are not always available for manufactured homes not tied to land in many states. All other homeowners can apply for a homestead exemption for their primary residence. This designation gives homeowners protections from judgments by creditors other than the mortgage lender. State laws should specify that all primary residences can be designated a homestead, including all manufactured homes.
  

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