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More on manufactured homes

Posted By Russ Roberts On September 28, 2008 @ 10:05 pm In Government Intervention | Comments Disabled

In this post [1], I provided excerpts from an article describing how Congress had leaned on Fannie Mae to encourage loans for mobile homes, known in the industry as manufactured homes. Martin Brock commented:

So what’s the problem with FNMA buying mortgages on manufactured homes?
My sister lived in one for years while she got her veterinary practice
off the ground. The issue is credit worthiness. Can the buyer afford
the home? Are you suggesting that a less costly home is necessarily
less affordable to its buyer? Do you have any evidence that mortgages
written on manufactured homes are more likely to default?

There’s no problem with Fannie Mae buying mortgages that fund mobile home purchases. The problem is Fannie Mae doing it with my money at the encouragement of Congress. And here is what Ed Gramlich says [2] (p. 54) about loans financing mobile homes:

As with subprime loans, manufactured housing loans have been riskier than conventional mortgages, and the normal APR is 3 or 4 points about the prime mortgage rate. Unfortunately, manufactured housing loans are also susceptible to default, with default rates currently on the order of 12%.

The source Gramlich gives for that default stat is a study by Apgar in 2002. I wonder what they are now.

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[1] this post: http://cafehayek.com/2008/09/fannie-and-manu.html

[2] Ed Gramlich says: http://www.amazon.com/Subprime-Mortgages-Americas-Latest-Boom/dp/087766739X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1222641385&sr=8-1

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