Prefab to Fabulous
Hall, Scott, Independent Banker
Tap into the growing market for manufactured home financing
"Luxury, three-story home on wooded acre at end of quiet cul de sac in prestigious subdivision. 3 bedroom, 2+ bath, finished basement, 2-car garage, library, formal dining room, great room and cedar decking. $300,000."
The suburban Washington, D.C., home described in this 1999 classified ad is attractive by any standard. The traditional exterior-- black shutters, lush gardens and graceful dormers-are sheltered under a canopy of mature elm and maple trees. Yet the home is anything but traditional. It arrived at the building site in 1995 in four pieces on the back of a truck and was assembled with the help of a few workmen and a crane. It represents a trend that's sweeping large parts of the nation.
Welcome to the new age of manufactured housing.
Demand for manufactured homes has soared in recent years as materials and construction techniques have improved. According to Joe Owens, vice president of the Manufactured Housing Institute, a factory-built home can cost 40 to 50 percent less than a comparable site-built dwelling. They are faster to construct and are every bit as strong and attractive as traditionally built homes. In fact, Owens says most engineers will have trouble discerning the difference between this product and a site-built house.
In the case of the home described in the ad above, the only way to tell that it is not site-built is to crawl into the attic where a three-inch high seam, created when the sections of the house were fused together, runs from one end of the building to the other.
The single-section homes (some people know them as pre-fabs and modulars) that once dominated the industry are quickly giving way to roomier, more upscale, sophisticated dwellings. In 1981, only 30 percent of factory-built homes were multi-section. Today, that figure is more than 60 percent.
"Whole communities are being created with manufactured homes," Owens says. "They make up 30 percent of all single-family sales today." Case in point: New Colony Village, in Jessup, Md., which looks like a traditional suburban subdivision with two-story houses, big yards and roomy basements. It is made up entirely of manufactured homes. In New Mexico 48 percent of all houses are factory-built. And the town of Valdez, Alaska is, essentially, a community of manufactured homes.
According to Michael Hindman, president of ICBA Mortgage, the ICBA's manufactured home and secondary mortgage market financing subsidiary, community banks should be taking greater advantage of this home lending opportunity. "This market, which can be very profitable for banks, is relatively overlooked and untapped particularly for resales and refinances," Hindman says. "Community bank demographics, which mirror the location of most manufactured homes, is precisely why ICBA began a financing program for manufactured housing six years ago."
Hindman says the key to enjoying that profit is in understanding this niche product. Initial financing for most factory-built homes comes from retailers and dealers. Consequently, bankers will find their greatest opportunity in resale and refinancing. "Lending for the resale and re-fi market, which is three times larger than the initial sale market, has simply not caught up with demand," Hindman says.
National Bank of Alaska started offering manufactured home loans in 1994. Now, more than 10 percent of all homes in Anchorage are factorybuilt, and hundreds of the dwellings are shipped, by barge, each year to remote villages around the state. National Bank of Alaska's manufactured housing loan program, which offers longer financing than most other banks in the state, became one the top manufactured home producers on ICBA Mortgage's program four years running by responding to that need.
Part of the reason for National Bank of Alaska's success is the way it has structured its program, separating it from traditional mortgage originations and operations. …