A "manufactured home" is a type of housing that's delivered to a destination and, once there, is usually secured to the ground or a foundation. If you default on your manufactured home loan, the lender might be able to take possession of it through repossession or foreclosure.
The terms "mobile home," "manufactured home," and "modular home" are frequently used interchangeably, but these housing types are different.
In 1974, Congress passed the Mobile Home Construction and Safety Standards Act (the Act), which directed the U.S. Department of Housing and Urban Development (HUD) to put forth federal construction standards for mobile homes. Before the Act, mobile homes were built with little uniformity regarding construction or safety standards.
All mobile home units constructed after the effective date of the HUD standards (June 16, 1976) must have a HUD label certifying that the home has been inspected and constructed in compliance with the Act. On October 8, 1980, Congress enacted public law 96-399, which officially changed the name of this type of home from "mobile home" to "manufactured home."
The term "manufactured home" typically means a unit constructed under the HUD construction and safety standards, whereas a "mobile home" refers to homes built before June 15, 1976, when the federal standards took effect.
A manufactured home is structurally complete when it leaves the factory and is transported in one or more sections. Manufactured homes are constructed on a permanent chassis with a tongue, axles, and wheels for transport.
Modular homes, on the other hand, are constructed to the same state, local, or regional building codes as site-built homes. Sections of a modular home are transported to the building site on truck beds and then connected by local contractors.
Initially, a manufactured home is considered personal property, like an automobile. In most states, parties convey ownership of manufactured homes by a certificate of title, with security interests noted on the title. In states that don't use a certificate of title, a security interest in a manufactured home is perfected (made) through a UCC filing.
Although a manufactured home is considered personal property initially, a homeowner can usually take steps to change the classification from personal property to real property.
Many states have statutes that provide procedures for converting a manufactured home to real property, while a few states have statutes that specify whether a manufactured home is considered personal property or real estate in credit transactions. Other states have a statutory scheme that establishes criteria for taxing the home as real property, and certain other states have no statute on the topic.
Generally, a manufactured home must be permanently affixed to the land to be classified as real property. In some states, a manufactured home can be converted to real property if it is permanently affixed to leased land, while other states require that the manufactured home owner also own the land. (Sometimes manufactured home owners own the land on which the home is situated, but in other cases, the manufactured home might be located on rented land or a leased space in a manufactured home park.)
Typically, the requirements for a manufactured home to become real property include:
Manufactured homes that aren't permanently affixed to the land or where proper procedures haven't been followed to convert the manufactured home to real property remain classified as personal property.
If the borrower defaults on loan payments for a manufactured home, the creditor can repossess or foreclose the home. How the creditor does this depends on whether the home is classified as personal or real property.
Generally, the creditor repossesses the home if the home is personal property. If the manufactured home is officially considered part of the real property, the creditor forecloses on the manufactured home.
However, if a manufactured home is wrapped up with the land as collateral for the loan, the lender will likely foreclose—even if the manufactured home is still classified as personal property.
If the manufactured home is considered personal property, the creditor can repossess it, most likely using a replevin process.
To repossess a manufactured home, creditors often use a judicial process called "replevin." A replevin is similar to a judicial foreclosure in that a creditor files a lawsuit in court and asks the court to grant an order for repossession.
With "self-help repossession," the creditor retakes possession without judicial process, like when a repossession agent comes and takes a car away. This process is available in most states but is not especially practical for manufactured homes. It would be difficult, if not impossible, to take the home without breaching the peace (a requirement for self-help repossession) or taking the borrower's other belongings, like furniture or other personal property located in the home.
Moreover, a few states prohibit self-help repossession for manufactured homes.
If a manufactured home is part of the real property, then the home is treated as real estate, and the lender must use state foreclosure procedures.
In states that don't use a certificate of title, the security interest in the manufactured home is typically perfected through a UCC filing. Then, the manufactured home is considered a fixture.
If you own the land your home rests on and have a mortgage on that land, but you don't complete all the steps to convert the manufactured home to real property, things can get complicated if you then default on your payments for the land loan.
If the manufactured home sits on land you own, the home might be considered a fixture if it has been permanently affixed to the land. In this type of situation, any mortgage on the land might potentially cover the manufactured home, too, if the mortgage includes improvements. If this is the case, you can't remove the manufactured home from the property (and you will lose it along with the land) if you stop making payments on the land.
Example. Let's say you first acquired the land by taking out a mortgage. You later buy the manufactured home outright and permanently attach it to the land. Your mortgage states that the land, as well as all improvements now or later erected on the property and any fixtures, act as security for the debt. As a result, the mortgage on the land also covers the manufactured home. You, therefore, can't simply move the manufactured home to another location if the lender forecloses because you stopped making payments on the mortgaged land.
Generally, whether a manufactured home is a fixture is a question of fact. For instance, if the tongue, axles, and wheels have been removed and the home is permanently affixed to the ground, it will probably be considered a fixture.
If your home is classified as personal property and not a fixture, then if you default on payments for a land mortgage, the land will be foreclosed, and you can move your manufactured home to a new location.
Job loss, medical expenses, or other financial hardship can lead a person to default on a loan covering a manufactured home, leading to a repossession or foreclosure.
Manufactured home owners have legal rights when facing foreclosure and repossession, similar to stick-built home owners. Some of these rights include various rights during a foreclosure or repossession, such as the right to receive notice of the action, various legal protections during the process, and the opportunity to negotiate with the lender to avoid losing the home.
To learn more about the rights, process, and timeline that applies to your situation, talk to a local lawyer.
The options for manufactured home owners facing foreclosure and repossession are similar to those available to traditional home owners. A few of your options might include a:
With a forbearance agreement, the lender agrees to reduce or suspend your loan payments for a specific amount of time. In exchange, you must resume making your payments at the end of the forbearance period. You'll also have to make up the missed amounts.
If you've missed some of your loan payments due to a temporary hardship, a repayment plan will spread the past-due amount over time, typically three to six months. You'll pay a portion of the overdue amount along with your regular payment amount each month. At the end of the repayment period, you will be current on your payments, and you'll resume paying the normal monthly payment amount.
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.
A "short sale" occurs when the lender permits the homeowner to sell the home for an amount that falls short of the amount owed. (With a regular sale, you sell the home for at least enough to cover the debt.)
A "deed in lieu of foreclosure" is a transaction where the homeowner voluntarily transfers the property's title to the lender in exchange for a release from the loan obligation.
Some consequences of losing your manufactured home to foreclosure or repossession include the loss of the home, damage to your credit, and difficulty getting new credit.
To rebuild your credit after a foreclosure or repossession, pay your bills on time and dispute errors on your credit reports. You can also take other steps like getting a secured credit card and paying down certain debts to lower your credit utilization ratio.
For more information about manufactured housing, go to HUD.gov and enter "manufactured home" in the home page search box to find a list of relevant links.
If you need specific information about your circumstances, consider talking to an attorney in your state.