Freddie Mac Manufactured Housing Community Loans

Customized Loans for Manufactured Housing Communities Insured by Freddie Mac

Manufactured housing communities (MHCs) are a reliable source of affordable housing for much of the population, which is why Freddie Mac is eager to help maintain the supply of high-qualify manufactured housing around the country. If you're an investor or developer looking to purchase or refinance an MHC, Freddie Mac's Manufactured Housing Community Loan could be a great option that offers excellent terms, including non-recourse execution and loan-to-value (LTV) ratios of up to 80% for eligible properties. Manufactured Housing Community Loans are offered in flexible 5-, 7-, and 10-year term lengths and amortizations as long as 30 years.

The importance of manufactured housing communities is understated greatly. Affordable housing is not always readily available to those who need it, and more manufactured housing communities could be a solution to that. Freddie Mac’s manufactured housing community finance program provides investors with attractive terms and options to help build more interest in financing MHC projects and maintain the supply of high-quality manufactured housing across the nation.

Freddie Mac Manufactured Housing Community Loan Highlights

  • Designed explicitly for MHC funding
  • Increases options for underserved populations in regard to affordable housing, particularly in rural and non-metro areas
  • Up to 25% of the homes can be rental properties
  • Virtually no limits on age or family size
  • Discounted pricing and third-party report rebate available for borrowers who implement MHC Tenant Protections

Freddie Mac Sample Terms for Manufactured Housing Community Loans

Size: $1 million minimum

Terms: 7, 5, and 10-year terms (longer loans may be approved at the lender’s discretion), both fixed and variable-rate loans available, partial and full-term interest-only loans also available

Amortization: Up to 30 years

Maximum LTV/Minimum DSCR:

  • 5-7 Year Loans:
    • Amortizing: 75%/1.30x
    • Partial Term Interest-Only: 75%/1.30x
    • Full Term Interest-Only: 65%/1.40x
  • 7 Year Loans:
    • Amortizing: 80%/1.25x
    • Partial Term Interest-Only: 80%/1.25x
    • Full Term Interest-Only: 70%/1.30x
  • 7+ Year Loans:
    • Amortizing: 80%/1.25x
    • Partial Term Interest-Only: 80%/1.25x
    • Full Term Interest-Only: 70%1.35x

Recourse: Typically non-recourse with standard “bad boy” carve-outs

Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No prepayment premiums are required in the last 90 days of the loan or if the loan is refinanced with another Freddie Mac loan.

Eligible Borrowers:

  • Should have no less than two years of experience owning manufactured housing communities and currently own at least one other manufactured housing community.
  • Can be a corporation, limited partnership, tenancy in common (TIC) with no more than 10 members, or a limited liability company (LLC). Real estate investment trusts (REITs), general partnerships, some trusts, and limited liability partnerships (LLPs) are allowed sometimes, depending on the circumstances.
  • For loans of less than $5 million, borrowers can be a single asset entity (SAE) or a single purpose entity (SPE). For loans of $5 million or more, they must be an SPE, except for TICs, which each member must be an SPE, regardless of size.

Eligible Properties:

  • Stabilized manufactured housing communities managed professionally. Age restrictions are allowed, but Seniors Housing Loans are not.
  • Must have no less than five pad sites.
  • Up to 25% of homes can be rented out.
  • Manufactured homes must adhere to HUD safety standards and must be compliant with the Federal Manufactured Home Construction and Safety Standards Act of 1974.
  • Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.
  • Private wells/septic systems may be permitted under certain circumstances.
  • RV resorts or broken condominiums are not allowed.

Sellers/Servicers: Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but by preference, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities.

Supplemental Financing: Allowed

Assumability: Loans are assumable with lender approval, and require a 1% assumption fee paid to Freddie Mac as well as a $5,000 underwriting fee paid to the lender

Timing: Borrower will typically receive a commitment 45 to 60 days after initial application; third-party report timing and borrower due diligence submission may speed up or slow down the process

Advantages:

  • Competitive interest rates
  • Loans are nonrecourse
  • 60- to 120-day rate locks available, with early-rate lock, spread-lock, and index-lock options available
  • Loans fully assumable (with approval and fees)

Disadvantages:

  • May require third-party reports, including appraisal, Phase I Environmental Assessment, and physical condition assessment
  • Application fees required: the larger between $2,000 or 0.1% of the loan amount
  • Replacement reserves required ($50/pad site per year or $250/rented manufactured home per year if owned by the borrower and included in the loan's collateral)
  • Requires a loan origination fee
  • Typically requires between $8,000 and $12,000 in legal fees
  • Lender application fees also required (average of $15,000, including third-party reports, but may vary based on specific lender)
  • 2% rate lock fee usually required (refunded after Freddie Mac purchases loan, usually around 30 days post-closing)

Manufactured Housing Community Tenant Protections for Rebate Eligibility

Borrowers who agree to the following terms will be eligible for discounted pricing and up to a $10,000 rebate for third-party reports. To be eligible, borrowers must have the following MHC Tenant Protections in all homeowner leases within 12 months after loan origination:

  1. One-year renewable lease term unless there is valid reasoning for nonrenewal.
  2. 30-day written warning of rent increases.
  3. Five-day grace period for rent payments.
  4. The right to cure defaults on rent payments.
  5. Right to sell the manufactured home to a buyer (subject to that borrower’s eligibility as a new tenant in the community) without having to first relocate the home out of the community.
  6. Right to sell the manufactured home in place within 30 days after eviction by the community owner.
  7. Right to sublease, or assign the pad site lease, for the unexpired term to the new buyer of the tenant’s manufactured home if the new buyer qualifies as a new tenant within the community.
  8. Right to post “For Sale” signs that comply with community rules and regulations.
  9. Right to receive at least 60 days’ notice of planned sale or closure of the community.

It is important to bear in mind that any MHC Tenant Protection that violates applicable laws will be void automatically and will not affect the enforceability of any other provisions of the lease.