Workout Agreements: Avoiding Foreclosure of Your Manufactured Home
Here are some of your options to avoid foreclosure or repossession of your manufactured home, including forbearances, repayment plans, loan modifications, short sales, and deeds-in-lieu.
If you have fallen behind in your manufactured home loan payments, there are workout arrangements that can help you avoid foreclosure or repossession of the home. Here you can learn about forbearance agreements, loan modifications, repayment plans, short sales, as well as deeds in lieu of foreclosure, and how they could help you either keep your manufactured home or exit the property gracefully.
(Learn more about manufactured home foreclosure and repossession.)
Workout Options to Avoid Repossession/Foreclosure
If you default on your manufactured home payments, the creditor can seize your home. The home will either be repossessed or foreclosed, depending on whether the manufactured home is assessed as personal property or real estate. If the property is considered personal property, then it will be repossessed; but if the manufactured home is part of the real property, then a foreclosure will occur. (See Manufactured Home Foreclosures & Repossessions to learn more.)
Workout agreements are available for those who are behind in their manufactured home loan payments. Potential workout options include:
- forbearance agreements
- loan modifications
- repayment plans
- short sales, and
- deeds in lieu of foreclosure.
With a forbearance agreement, the lender agrees to reduce or suspend loan payments for a certain period of time. In exchange, the borrower must resume the full payment at the end of the forbearance period, plus pay an additional amount to get current on the missed payments. The specific terms of a forbearance agreement will vary from lender to lender.
A loan modification is a permanent restructuring of the loan where one or more of the terms are changed to provide a more affordable payment. With a loan modification, the lender may agree to do one of more of the following to reduce your monthly payment:
- reduce the interest rate
- convert from a variable interest rate to a fixed interest rate, or
- extend of the length of the term of the loan.
Generally, to be eligible for a loan modification, you must:
- show that you cannot make your current mortgage payment due to a financial hardship
- complete a trial period to demonstrate you can afford the new monthly amount, and
- provide all required documentation to the lender for evaluation.
There are many different loan modification programs available for borrowers, such as the Home Affordable Modification Program (HAMP), which is part of the federal government’s Making Home Affordable initiative. HAMP assists borrowers by modifying their first lien mortgages so that the monthly payments are lower and more affordable.
Loans on manufactured homes are eligible for modification under HAMP if the manufactured home and the land secure the first lien mortgage loan and both are classified as real property under applicable state law.
To learn more about HAMP, see The Home Affordable Modification Program (HAMP). (To find out about other government programs for struggling homeowners, see our Government Foreclosure Prevention Programs topic area.)
If you’ve missed some of your loan payments due to a temporary hardship, a repayment plan will spread the past due amount over a specific period of time, typically three- to six-months. This allows you to catch up on the delinquency over a period of time.
During the repayment period, a portion of the overdue amount is added to each of your regular mortgage payments. At the end of the repayment period, you will be current on your mortgage payments and resume paying your normal monthly payment amount.
Short Sales and Deeds in Lieu of Foreclosure
A short sale occurs when the lender permits the homeowner to sell the home for an amount that falls "short" of the amount owed, whereas a deed in lieu of foreclosure is a transaction where the homeowner voluntarily transfers title to the property to the lender in exchange for a release from the loan obligation. (Learn more about short sales and deeds in lieu of foreclosure.)
Eligible manufactured home owners may qualify for a short sale or a deed in lieu of foreclosure under the Home Affordable Foreclosure Alternatives (HAFA) program, which is also part of the government’s Making Home Affordable initiative. The manufactured home and the land must secure the first lien mortgage loan and both must be classified as real property under applicable state law. Learn more about HAFA.
Special Requirements for FHA-Insured Mortgages
Following a borrower’s default, a lender with an FHA-insured mortgage on a manufactured home must attempt to contact the homeowner either by telephone or in a face-to-face meeting to discuss the reasons for the default and attempt to cure the default before accelerating the loan. (When a loan is “accelerated,” you have to immediately pay the entire balance of the loan, not just the past due amounts.)
The lender must also send written notice of the default by certified mail to the homeowner prior to acceleration, giving 30 days after the notice to either:
- cure the default or
- agree to a modification agreement or repayment plan.
Additionally, the loan can be reinstated even after acceleration, if the borrower:
- brings the loan current
- executes a modification agreement, or
- agrees to an acceptable repayment plan.
For More Information
To get information about these and other options to avoid foreclosure, see our Alternatives to Foreclosure area. 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.