Magazine article American Banker

Fannie Prefab Plan Gets Cautiously Upbeat Review

Magazine article American Banker

Fannie Prefab Plan Gets Cautiously Upbeat Review

Article excerpt

Fannie Mae's announcement Tuesday that it would start a new manufactured housing loan purchase program was welcomed by lenders but also raised plenty of questions about how the government-sponsored enterprise will manage the risks in a niche that has burned many companies.

Shares of manufactured housing builders were higher that day amid expectations of a sizable increase in available funding. Dr. Jim Clifton, a vice president for the Manufactured Housing Institute, said Fannie could inject $2 billion of capital into the mobile home marketplace, which would lift available capital by about 33%.

Still, Fannie is among the companies that have been stung in the segment. It said it "had impairments" of $206 million on manufactured housing bonds from 1995 to 2003, mostly in the last couple of years and primarily because of losses on its stake in the ill-fated Conseco Finance. Fannie now has a $10 billion manufactured housing portfolio.

Several people at Fannie Mae and outside the company said lessons from those losses were evident in this new foray. For instance, it is requiring that lenders use its underwriting software.

"This is one of several steps we're taking to try to change the manufactured housing market, and we'll do more," Fannie spokesman Albert King said.

Ken Roberts, an industry veteran who is now a consultant working out of Minnesota, noted that Fannie had been operating with tighter underwriting guidelines for manufactured housing since last year. "They had it with the losses they have taken," he said, "and the underwriting will be restrictive enough" that the new network the company has originating the loans will not "get into trouble."

The types of loans Fannie will buy under the program have not been without a market. Mr. Roberts said that for years banks like Wells Fargo & Co. …

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