If you fall behind on the mortgage payments for your manufactured home, you may be able to avoid foreclosure by bringing your mortgage current. This is called the right to cure. When it comes to manufactured homes, some state laws and federal law provide a special right to cure a default before a creditor can repossess your home.
Read on to learn more about curing a manufactured home mortgage default so that a creditor cannot take your home after you have fallen behind on your loan payments.
(To learn more about the foreclosure of manufactured homes, see our Foreclosure of Manufactured Homes topic area.)
What Is a Manufactured Home?
Manufactured homes, formerly known as mobile homes, are homes that are constructed on a permanent chassis, with a tongue, axles, and wheels for transport to the owner’s site in one or more sections. Manufactured homes must be built to U.S. Department of Housing and Urban Development (HUD) standards pursuant to the Mobile Home Construction and Safety Standards Act of 1974.
A manufactured home is initially considered personal property, but a homeowner can take steps to change the classification from personal property to real property. Generally, to be classified as real property, a manufactured home must be permanently affixed to the land and meet any other state requirements or conditions. (To learn more, see Manufactured Home Foreclosure & Repossessions.)
Creditors Can Repossess or Foreclose if You Default on Payments
A creditor can recover a manufactured home if the borrower defaults on loan payments. If the property is considered personal property, then it will be repossessed. Creditors often use a judicial process called replevin. If a manufactured home is part of the real property, then a foreclosure will occur. To learn more about repossession, replevin, and foreclosure of manufactured homes, see Manufactured Home Foreclosures.
However, before a creditor or lender can repossess or foreclose a manufactured home, some state laws and federal law require that the creditor provide debtors the opportunity to cure the default.
Right to Cure Laws
Right to cure laws provide a debtor with the opportunity to catch up on past-due loan payments by paying the defaulted amount, plus any costs and fees, to stop a creditor from seizing the home. Curing the default reinstates the loan and allows the debtor to keep possession of the manufactured home.
Many state statutes provide a right to cure prior to acceleration or repossession in consumer credit transactions, or provide a statute specific to manufactured homes. (When a loan is “accelerated,” you have to immediately pay the entire balance of the loan, not just the past due amounts.)
While the particulars vary from state to state, right to cure laws generally require that:
- the creditor send the borrower notice of the default and right to cure, and
- wait for a certain period of time, for example 20 days, prior to repossessing the manufactured home.
Usually, state law limits the number of times that a debtor may cure the default and reinstate a defaulted account.
Limitations of State Right to Cure Laws
State laws often limit the right to cure when it comes to manufactured homes. Examples include:
- The right to cure may only apply to manufactured homes that are classified as personal property.
- The right to cure may only apply to motor vehicles.
- The right to cure may only apply to goods other than motor vehicles.
Federal Law: Limited Right to Cure for Manufactured Homes
In certain cases, the Office of Thrift Supervision’s federal regulations provide debtors with a right to cure a default on a manufactured home loan. The regulations pertain to first mortgages on residential manufactured homes, no matter if the manufactured home is classified as real estate or personal property.
Under these regulations, manufactured home creditors who want federal preemption of state interest-rate ceilings must provide debtors with a notice of default by certified mail, return receipt requested, before accelerating payment of the entire outstanding balance of the obligation, repossessing a home, or initiating a foreclosure. The notice of default must:
- state the nature of the default
- state the action needed to cure the default
- state the creditor’s intended actions if the default is not cured
- state the debtor’s state law redemption rights, and
- provide 30 days to cure the default.
The debtor is not entitled to notice of default more than twice in any one-year period or if the property is abandoned.
If the creditor does not provide the debtor with notice of the right to cure, the debtor can assert that the state interest rate ceiling should apply to the transaction and would be entitled to any remedy provided by the state law if that ceiling was exceeded.
For More Information
For general information about manufactured housing, go to www.hud.gov and enter "manufactured home" in the home page search box to find a list of relevant links.