As of 11/08/04

Definition of a Manufactured Home

Any dwelling unit built on a permanent chassis and attached to a permanent foundation system is a "manufactured home" for purposes of Fannie Mae's guidelines. Other factory built housing (not built on a permanent chassis), such as modular, prefabricated, panelized, or sectional housing, is not considered manufactured housing and continues to be eligible under the guidelines stated in the Selling Guide.

Effective Dates

The changes described in this Announcement are effective for mortgages secured by manufactured homes as of the dates set forth in this Announcement, notwithstanding any provisions in any Master Agreement, contract, or other agreement to the contrary. In summary, these dates are as follows:

Effective Date: December 1, 2004

• Fannie Mae has announced lower down payment requirements for these mortgages. Fannie Mae will permit a maximum loan-to-value ratio (LTV), combined loan-to-value ratio (CLTV), or home equity combined loan-to-value ratio (HCLTV) up to and including 95% for loan terms up to and including 30-years for mortgages meeting the following criteria:
• principal residences only.
• purchase money and limited cash-out refinances, and
• mortgage insurance coverage of 35% required for LTVs of 90.01% --95% with loan terms >20 to < 30 years.
• Desktop Underwriter will be updated during the first quarter of 2005 (at which time we will integrate this information into these guidelines) to reflect these modifications to our eligibility requirements for mortgages secured by manufactured homes.
• Until then, mortgage loans meeting the expanded criteria will be eligible for purchase if they receive an "Approve/Ineligible" or "Refer/Ineligible" recommendation (or for lenders participating in our Expanded Approval™ with Timely Payment Rewards^® product line, an "EA-I/Ineligible" or "EA-II/Ineligible" recommendation) if the only reason for ineligibility is the LTV and loan term.

Product Eligibility

• Other products or eligibility terms not referenced in this set of guidelines are not eligible for mortgages secured by manufactured homes. Variances or other terms contained in any lender contract are not eligible for use with mortgages secured by manufactured homes.

• Fannie Mae will purchase mortgages secured by manufactured homes that meet the following general criteria:
• First lien mortgages only;
• Fully amortizing fixed rate mortgages, or adjustable rate mortgages with initial fixed rate periods of 7 or 10 years;
• Principal residences and second home dwellings (investment properties are not eligible); and
• Maximum loan-to-value ratio (LTV) or combined loan-to-value (CLTV) or home equity combined loan-to-value (HCLTV), loan terms, occupancy, and loan purpose as follows:

Eligibility Criteria

Buydowns

Permanent

Allowed

Temporary

Not Allowed

mortgage insurance

Loans must have mortgage insurance coverage as follows:

• The mortgage can include the financing of borrower-purchased mortgage insurance premiums as well as the cost of bona fide and documented transportation, site preparation, and dwelling installation at the site
• Financing of any other forms of insurance or other costs is not permitted for purchase money mortgages, but is permitted for limited cash-out refinance transactions.

Asset Requirements

down payment requirements

• A minimum down payment of 5% must come from the borrower's own funds. Additional required down payment funds may come from gifts.
• A borrower may also use funds provided by his or her employer as part of an established employer assistance program.

Trade Equity

• Trade equity from the borrowers existing manufactured home may be used as part of the borrowers minimum down payment requirement.
• The maximum equity contribution from the traded manufactured home is 90% of the retail value for the traded manufactured home based on the N.A.D.A. Manufactured Housing Appraisal Guide. However, if the borrower has owned the traded manufactured home for less than 12 months preceding the date of the loan application, the maximum equity contribution is the lesser of 90% of the retail value or the lowest price at which the home was sold during that 12 month period.
• Any costs associated with the removal of the traded home or any outstanding indebtedness secured by liens on the home must be deducted from the maximum equity contribution.
• Fannie Mae requires a lien search in the appropriate real property and personal property records to verify ownership and to determine whether there are any existing liens on the manufactured home and land (or liens on the home and the land if they are encumbered by separate liens) for the traded manufactured home.
• The seller of the new manufactured home must provide proof of title transfer and satisfaction of any existing liens on the traded manufactured home.

Land Equity

• Where the borrower holds title to the land on which the manufactured home will be permanently attached, the value of the land may be credited toward the borrowers minimum down payment requirement.
• The borrowers equity contribution will be the difference between any outstanding liens against the land and the market value of the land.
• The manner for determining the value of the land is based on when the borrower acquired the land:
•  If the borrower purchased the land more than 12 months preceding the loan application - or if the borrower acquired the land at any time as a gift, inheritance, or other non-purchase transaction - the value of the land will be its current appraised value.
•  If the borrower purchased the land 12 or fewer months preceding the date of the loan application, the value of the land will be the lesser of its sales price or its current appraised value.
• If the borrower purchased the land 12 or fewer months before the date of the mortgage application, the lender must document the borrowers cash investment by obtaining a certified copy of the HUD-1 uniform settlement statement (or similar settlement statement), a copy of a warranty deed that shows there are no outstanding liens against the property, or a copy of a release of any prior lien(s).
• If the borrower acquired the land as a gift, inheritance, or other non-purchase transaction 12 or fewer months preceding the date of the loan application, the lender must obtain appropriate documentation to verify the acquisition and transfer of ownership of the land.

contributions

Borrower Contributions

• The borrower must make a 5% minimum down payment on a purchase transaction from his or her own funds.
• Additional required down payment funds may come from gifts in accordance with underwriting guidelines.
• A borrower may also used funds provided by his or her employer as part of an established employer assistance program in accordance with underwriting guidelines.
• DU does not consider the borrower's liquid funds in determining the borrower's minimum contribution to the transaction.
• Instead, DU will determine if the borrower is making the required down payment from his or her own funds based on the cash from borrower, cash deposit on sales contract, and borrower paid fees entered in Section VII.
• The following date fields are used by DU to calculate the borrower's contribution:

Cash from the borrower

+ Cash deposit on sales contract

+ Borrower paid fees

-Gift funds

=DU's estimate of borrower contributions

• If DU determines that the borrower is not contributing 5% from the date fields described above, the loan will receive an "Ineligible" recommendation.
• DU will return a message stating that, based on the date entered, it appears that the borrower is not contributing the minimum required 5% down payment for this manufactured home transaction.
• In addition to the two types of credits identified above (cash deposit on sales contract and borrower paid fees), there are a number of other types of credits that can be entered as "Other Credits" in Section VII.
• If DU is unable to determine that the borrower is contributing the required 5% down payment due to date entry in the nonspecific credit field, the system will return a message stating that DU is not able to determine if the borrower is contributing the minimum required 5% down payment from his or her own funds for this manufactured home transaction.
• The lender must verify that the borrower is making the required minimum contribution; otherwise the case is not eligible for sale to Fannie Mae.

Transaction Type

Purchase

Purchase Money Transactions

• Purchase money transactions are those in which the proceeds are used to finance the purchase of the manufactured home. Proceeds may also be used to purchase the land, or the land may be previously owned by the borrower, either free of any mortgage or subject to a mortgage that will be paid off with the proceeds of the new purchase money mortgage.
• The borrower does not receive any cash back with a purchase money transaction.
• The sales price of the manufactured home may also include bona fide and documented transportation, site preparation, and dwelling installation at the site.
• The purchase price of any personal property items (non-realty items) in conjunction with the purchase of the manufactured home must be deducted from the sales price and cannot be financed as part of the mortgage.
• The maximum LTV ratio, or CLTV/HCLTV ratio if there will be any subordinate financing outstanding after closing of the mortgage, for purchase money transactions is:
• 95% for principal residence homes for mortgages with terms not greater than 20 years;
• 90% for principal residence homes for mortgages with terms greater than 20 years and including 30 years; and
• 90% for second homes for mortgages with terms up to and including 30 years.
• The LTV ratio (and CLTV/HCLTV ratio, if applicable) for a loan secured by a newly built manufactured home that is being attached to a permanent foundation system in connection with a purchase transaction will be based on the lower of:
• The sales price of the manufactured home plus (if the land was purchased in the 12 months preceding the loan application date) the lowest sales price at which the land was sold during that 12 month period or (if the land was purchased more than 12 months preceding the loan application date) the current appraised value of the land; or
• The "as completed" appraised value of the manufactured home and land.
• The LTV ratio (and CLTV/HCLTV ratio, if applicable) for a loan secured by a manufactured home that already exists on its foundation will be based on the lowest of:
• The sales price of the manufactured home and land; or
• The current appraised value of the manufactured home and land; or
• If the manufactured home was built in the 12 months preceding the loan application date, the lowest price at which the home was previously sold during that 12 month period plus the lower of the current appraised value of the land, or the lowest price at which the land was sold during that 12 month period (if there was such a sale).

Cash Out refinance

• A cash-out refinance involves the payoff of an existing first lien mortgage secured by the manufactured home and land (or existing liens if the home and land were encumbered by separate first liens), or enables the property owner to obtain a mortgage on a property that does not already have a mortgage lien against it, and permits the borrower to take equity out of the property in the form of mortgage proceeds that may be used for any purpose.
• To be eligible for a cash-out refinance, the borrower must have owned both the manufactured home and land for at least 12 months preceding the date of the loan application.
• The maximum LTV ratio, or CLTV/HCLTV ratio if there will be any subordinate financing outstanding after the closing of the mortgage, is 65% for principal residence homes for mortgages with terms not greater than 20 years.

• The LTV ratio (and CLTV/HCLTV ratio, if applicable) for a cash-out refinance for a loan secured by a manufactured home and land will be based on The current appraised value of the manufactured home and land.

Limited cash-out refinance

• Refinance transactions for manufactured homes may involve the payoff of liens (if the home and land were encumbered by separate liens) or the payoff of a single lien (if the home and land were encumbered by one lien).
• The appraised value is used by DU to determine the maximum LTV/CLTV ratios. The lender must calculate the appraised value according to the guidelines stated in Announcement 03-06.
• The appraised value is based on when the borrower acquired the home and whether the home and land are secured by
• separate liens or a single lien.
• The appraised value may also be based on the lowest sales price of the home in the 12 month period preceding the loan
• application.
• The land value is based on when, and under what circumstances, the borrower acquired the land. It is incumbent upon the lender to establish the correct appraised value and to enter the data correctly in the loan application.
• Enter the appraised value in DU based on the lower of the following:
• The current appraised value of the manufactured home and land, or
• If the manufactured home was owned by the borrower for less than 12 months on the loan application date and
• If the home and land are secured by separate liens, enter the lowest price at which the home was previously sold during that 12 month period plus the lower of the current appraised value of the land or the lowest sales price at which the land was sold during that 12 month period, or
• If the home and land are secured by a single lien, enter the lowest price at which the home and land were previously sold during that 12 month period.

mortgage insurance

Borrower-paid mortgage insurance premiums can be financed in the principal balance as provided for in Part V, Section 101.03 of the Selling Guide.

Financing of any other forms of insurance or other costs is not permitted for purchase money mortgages, but is permitted for limited cash-out refinance transactions, as provided for in Part VII, Chapter 1, Section 103.02 of the Selling

Guide and Fannie Mae Announcement 03-06.

Property Eligibility

Manufactured Home Requirements

Manufactured homes must meet the following conditions:

• The manufactured home must be built in compliance with the Federal Manufactured Home Construction and Safety Standards that were established June 15, 1976.  Compliance with these standards will be evidenced by the presence of a HUD Data Plate that is affixed in a permanent manner near the main electrical panel or in another readily accessible and visible location.
• The manufactured home must be a one-family dwelling that is legally classified as real property. The towing hitch, wheels, and axles must be removed and the dwelling must assume the characteristics of site-built housing. The land on which the manufactured home is situated must be owned by the borrower in fee simple, unless the manufactured home is located in a cooperative or condominium project. Mortgages secured by manufactured homes located on leasehold estates are not eligible. Multi-width manufactured homes may be located wither on an individual lot or in a project development (i.e. cooperative, condominium, PUD, or subdivision). Mortgages secured by single-width manufactured homes are eligible for delivery to Fannie Mae only if the manufactured home is located in a cooperative, condominium, or PUD project.
• Project acceptance is required for multi-width and single-width manufactured homes if the project development is a cooperative or condominium. Project acceptance is also required if the property is a single-width manufactured home and the project is a PUD. In the case of cooperatives, both the land and swelling must be owned by the cooperative. In the case of condominiums, both the land and dwelling must be subject to the condominium regime.
• The manufactured home must be at least 12 feet wide and have a minimum of 600 square feet of gross living area. Further, the manufactured home must have sufficient square footage and room dimensions to be acceptable to typical purchasers in the market area. Fannie Mae does not specify other minimum requirements for size, roof pitch, or any other specific construction details.
• The manufactured home must be attached to a permanent foundation system in accordance with the manufacturer's requirements for anchoring, support, stability, and maintenance. The foundation system must be appropriate for the soil conditions for the site and meet local and state codes.
• If the property is not situated on a publicly dedicated and maintained street, then it must be situated on a street that is community owned and maintained or privately owned and maintained. There must be adequate vehicular access and there must be an adequate and legally enforceable agreement for vehicular access and maintenance.
• The manufactured home must be permanently connected to a septic tank or sewage system and to other utilities in accordance with local and state requirements.
• Fannie Mae requires the improvements to be completed, and fully paid for, when the mortgage is delivered to Fannie Mae. Specifically, the following must be completed:
• Site preparation for delivery of the manufactured home,
• Attachment of the manufactured home to the permanent foundation system,
• Permanent connection to the septic or sewage system, and
• Permanent connection to all necessary utilities (water, electricity, gas service, etc.)

Note: Exceptions to the foregoing may be only for minor items that do not affect the ability to obtain an occupancy permit (e.g.. landscaping, a driveway, a walkway, etc.), subject to all requirements and warranties for new or proposed construction. Mortgages secured by existing manufactured homes that have incomplete items, such as partially completed addition or renovation, or defects or needed repairs that affect livability, are not eligible for purchase until the necessary work is completed and fully paid for.

title Issues and Lien requirements

• Work completed to date indicates that the laws of some states do not clearly provide for a single lien on the manufactured home, together with the land on which it is situated, but instead, for example, require that the lien on the manufactured home be evidenced by notation on the certificate of title.
• While the laws of some states establish a procedure for surrender of the certificate of title when the manufactured home has become permanently affixed to the land that it has become real estate, the laws of other states do not allow for the elimination of the certificate of title to a manufactured home regardless of the degree of affixation of the home to the land. In those states, the lien on the land (evidenced by the mortgage or deed of trust) may be legally distinct from the lien on the manufactured home (evidenced on the certificate of title), though both are liens on real property. In those cases, the manufactured home is often treated as an immovable fixture (personal property that has become so permanently attached to the land that it has become real property).

Documenting a Lien on a Manufactured Home that is Real Estate

• Clear statutory and/or regulatory authority for surrendering the certificate of title when the manufactured home is permanently affixed to the land;
• Other recognized procedures for surrendering the certificate of title when the manufactured home is permanently affixed to the land;
• Statutory, regulatory, or judicial authority for recognizing a manufactured home as part of the real estate, without surrender of the certificate of title. A few states also require Uniform Commercial Code (U.C.C.) filings; or
• Affixation to the land such that the home is real estate from the inception, without initial classification as personal property and issuance of a certificate of title. Most states that permit manufactured homes to be treated as real estate without first being titled as personal property also have procedures for issuing a certificate of title and then surrendering it.

Uniform Commercial Code (UCC)

• State law that does not provide for surrender of the certificate of title may pose some additional risk to the lender and Fannie Mae. Under the U.C.C., as adopted in almost every state, a lien evidenced on any outstanding certificate of title will have priority over a lien on real estate to which the manufactured home is affixed, which is evidenced by a mortgage or deed of trust.
• If state law requires a U.C.C. filing in order to perfect a security interest in a manufactured home, the lender must make such filing in any and all appropriate locations.

Note: Fannie Mae believes that if a lender follows procedures tailored to take advantage of all protection offered under existing state law - including taking steps to assure that no certificate of title still exists that bears evidence of any lien securing any other loan - sufficient legal protection is afforded.

Mobile Home Lien Requirements

To be eligible for purchase by Fannie Mae, a loan must be secured by a perfected lien (or liens) on real estate that consists of the manufactured home and land, and the manufactured home must be legally classified as real property under applicable state law, including relevant statutes, regulations, and judicial decisions.

Note: Although Fannie Mae prefers that the manufactured housing loan be a single real estate transaction because that is more familiar to lenders and provides less opportunity for error (particularly in the event of foreclosure), we do not believe that the single real estate lien is the only way to protect our interests. Consequently, a loan documented by a lien on the land evidenced by a mortgage or deed of trust and by a real estate lien on the manufactured home evidenced on the certificate of title (or other document) is acceptable if a single lien is not legally recognized under state law.

Chattel Lien

Loans in which there is a chattel lien on the home (chattel is a legal term for personal property), plus a real estate lien on the land, remain unacceptable. This is because we require that the home be so permanently attached, and that the intention of the parties that it remain permanently attached be so clearly apparent in the documentation, that the home is no longer personal property and has become real estate (although perhaps classified as an immovable fixture) under state law.

Mobile Home Requirements

Our requirements, which are set forth in greater detail below, in general provide that:

• The owner of the manufactured home must also own the land on which the home is situated;
• The manufactured home must be attached to a permanent foundation on the land;
• A mortgage (or deed of trust) must be recorded in the land records and must identify the encumbered property as including both the home and the land;
• Any certificate of title to the manufactured home must be surrendered to the appropriate state government authority, if possible under applicable law; and
• If the certificate of title cannot be surrendered, the lender must also indicate its lien on the certificate.

Note: Clearly these requirements involve complex and technical issues, particularly for lenders originating manufactured housing loans in multiple states. Fannie Mae makes no representations or warranties as to its correctness, completeness, or suitability for any particular purpose. Therefore, lenders must consult their own legal counsel on issues concerning titling of, and obtaining liens on, manufactured housing. Lenders must also monitor for changes to state law or practice. Fannie Mae will not excuse lenders from their representations and warranties required by our Selling and Servicing Guides, their Mortgage Selling and Servicing Contract, and any other contracts with Fannie Mae.

The following standards apply to mortgages secured by manufactured homes if the mortgage application is taken on or after August 24, 2003:

Mobile Home Lien Requirements/Certificate of Title

• The loan must be secured by both the manufactured home and the land, and both the manufactured home and the land must be legally classified as real estate under applicable state law.
• The purchase, conveyance, and financing (or refinancing) of the land and the manufactured home must be evidenced and secured by a single valid and enforceable note and first lien mortgage or deed of trust that is recorded in the land records, in states where applicable state law clearly provides for such a single lien.
• If state law permits the manufactured home to become real estate when it is immediately affixed to the permanent foundation system without issuance of a certificate of title, the lender must (if the transaction involves the purchase of a new manufactured home) obtain, and retain as part of the loan file, evidence that no certificate of title was issued. For example, if the lender obtains the manufacturers certificate of origin, this would be evidence, in most states, that no certificate of title could have been issued.

• If a certificate of title has been issued (when state law does not permit the manufactured home to become real estate without issuance of a certificate of title, or when the transaction does not involve purchase of a new manufactured home) but state law provides for or permits surrender of the certificate of title, the lender must obtain (and retain as part of the loan file) evidence that the certificate has been surrendered.
• Such evidence includes the confirmation required to be provided by the authority to which the certificate was surrendered, or if no such confirmation is obtainable, a copy of the documents submitted in connection with the surrender and evidence that such documents were delivered to the appropriate authority.
• If a certificate of title has been issued (when state law does not permit the manufactured home to become real estate without issuance of a certificate of title, or when the transaction does not involve purchase of a new manufactured home) but state law does not permit the manufactured home to become real estate without issuance of a certificate of title and does not provide for surrender of the certificate of title, the lender must indicate its lien on the certificate of title, must retain the certificate of title as part of the loan file, and must assure that no other lien is indicated on the certificate of title.
• Ownership of the manufactured home as shown on the certificate of title and ownership of the land as shown on the mortgage or deed of trust must be identical, i.e., the same individuals must sign both, each using the exact same name on both documents.

Fannie Mae Loan Documents

• Fannie Mae prefers the use of the standard Fannie Mae uniform instruments.
• If the lender does not use these loan documents, then it:

• Must use a single note evidencing all the debt related to the land and the home, and a mortgage (or deed of trust or Georgia security deed) securing such indebtedness (plus the certificate of title if state law so requires); and
• Is deemed to give the nonstandard document warranties that appear in the Selling Guide, Part I, Chapter 2, Section 202.01. Loan documents are not acceptable if they:
  • State that the home is personal property or contain other words to that effect;
  • State that the parties do not intend to attach the home to a permanent foundation system on the land, or contain statements inconsistent with that intention; or
  • Unless required by law, provide that rights of holders in due course are waived, or with other words provide that an assignee noteholder may be held liable for claims the borrower may have against other parties.

• In addition, the loan documents are not acceptable if they include consumer finance paper (which combines the note and security instrument in a single document) or a retail installment sales contract.

Security Instrument

• In the property description section of the security instrument, the lender must include a comprehensive description of the manufactured home along with the description of the land.
• The description should include any identifying number(s) (for example, vehicle identification number, serial number that must appear on the HUD Data Plate, etc.). In the case of multi-width units, there may be multiple such numbers.
• The description should also include make, model, size, and any other information that may be required by applicable law to definitively identify the home.
• The security instrument must also state that the manufactured home is an improvement to the land and an immovable fixture, or must include similar language as may be required by applicable law to assure, to the greatest extent possible, that the manufactured home will be treated as real estate under applicable state law.
• If applicable law provides specific obligatory wording, such wording must be used.

Intent to Affix the Manufactured Home

• The borrower and the lender must sign an affidavit that acknowledges their intent for the manufactured home to be permanently part of the real property that secures the mortgage and contains any specific language that may be required by applicable law.
• The affidavit must be recorded if that is possible, and must be retained in the loan file (after it is returned from the recorders office if it was recorded).

Title Insurance

• The mortgage must be covered under a standard real estate title insurance policy that insures that the manufactured home is part of the real property that secures the loan. This is generally evidenced by an ALTA 7 endorsement (or any other endorsements required in the applicable jurisdiction for manufactured homes that are treated as real estate).

Closing

• Lenders should utilize closing instructions that instruct closing agents to obtain the required documentation necessary to ensure that the manufactured home is attached to a permanent foundation system on the land, thus becoming part of the realty.
• Where a closing agent is not available to provide this service, the lender can rely on the certification of completion completed by the appraiser.
• Where state law provides that a manufactured home may be exempt from certificate of title requirements (for instance, where a home is attached initially to a permanent foundation system), such closing instructions should instruct the closing agent to ensure that the manufactured home qualifies for exemption from certificate of title requirements, including monitoring of property installation procedures and the related documentation, and to provide the lender with documentary evidence of that for retention in the loan file.
• Where state law allows for the elimination of the certificate of title, the closing instructions should instruct the closing agent to perform all necessary procedures to assure that the certificate of title to the manufactured home is properly retired, and provide the lender with documentary evidence of that for retention in the loan file.
• Additionally, lenders should obtain an insured closing protection letter for each mortgage loan that is secured by a manufactured home, if available. Finally, if there will be post-closing items related to conversion of the home from personal property to real estate, the lender should consider use of a properly circumscribed power of attorney from the borrower that may be used to complete those post-closing items as intended.

Lender's Obligation

The obligation of a lender that sells us mortgages secured by manufactured homes to indemnify us in certain circumstances encompasses all losses, damages, judgments, and legal fees that are based on, or result from, breach or alleged breach of obligations owed to the borrower by the manufacturer or by any party that sells the manufactured home to the borrower, delivers it to the site, or installs it at the site.

appraisal requirements

Fannie Mae will continue to require market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value. This means that the appraiser must develop and report in a concise format an adequately supported opinion of market value based on the sales comparison approach to value and further supported by the cost approach to value.

• The appraiser must address both the marketability and comparability of a manufactured home by selecting comparable sales of similar manufactured homes, for example, multi-width homes to multi-width homes, etc. In order for the loan to be eligible for delivery to Fannie Mae, the appraiser must use a minimum of two comparable sales of similar manufactured homes. The appraiser may use either site-built housing or a different type of factory-built housing as the third comparable sale. When that is the case, the appraiser must explain why site-built housing or a different type of factory-built housing is being used for the third comparable sale, and make (and support) appropriate adjustments in the appraisal report.
• An appraiser who is unable to locate sales of manufactured homes that are truly comparable to the subject property may decide that it is appropriate to use either older sales of similar manufactured homes or sales of similar manufactured homes that are located in a competing market so that he or she can establish a baseline for the sales comparison analysis and determine sound adjustments to reflect the differences between the comparable sales that are available and the subject property. The appraiser should analyze and report a sufficient number of comparable sales to support his or her opinion of value (which may require the use of more than three comparable sales in some cases).
• The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of the home (although he or she may use this type of information as additional supporting documentation). If the appraiser is unable to develop a reliable appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible for delivery to Fannie Mae.

Sales Comparison Approach to Value

• The sales comparison approach to value traditionally referred to as the market data approach is an analysis of comparable sales, contract offerings, and current listings of properties that are most comparable to the subject property.
• The appraisers analysis of a property must take into consideration all factors that have an effect on value, recognizing that a well-informed or well-advised purchaser will pay no more for a property than the price he or she would pay for a substitute property of equal desirability and utility if it were purchased without undue delay.

Cost Approach to Value

• The cost approach to value assumes that a potential purchaser will consider constructing a substitute residence that has the same use as the property that is being appraised.
• This approach measures value as a cost of production.
• Fannie Mae will not accept appraisals that rely solely on the cost approach as an indicator of value.

• In order to further enhance the quality of manufactured home appraisals and to provide the lender with additional information to improve its ability to underwrite the appraisal, we are requiring a detailed and supported cost approach to value for all manufactured home appraisals.
• The procedure involved in properly developing a detailed cost approach should improve the appraisers ability to:

• Recognize differences in manufactured home construction quality;
• Understand the differences between the comparable sales and the subject property;
• Extract from the market appropriate
• Adjustments for the sales comparison analysis; and
• Identify sales of manufactured homes that are similar enough to the subject property to use as comparable sales.

Appraisal Review

• Based on our review of appraisals of manufactured homes as part of our quality assurance efforts and feedback from customers and the Appraisal Institute, we believe that the unique property and appraisal issues associated with manufactured homes will be most appropriately addressed through supplemental analysis and reporting by the appraiser.
• Fannie Mae will require the appraiser to address more directly, in a standardized format, construction quality, property condition, market acceptance, indicated value by the cost approach, and support for the contributory value of the site.
• Based on our research, these documentation enhancements should improve property appraisal and underwriting quality to a level more comparable with site-built housing.

Fannie Mae Appraisal Forms

• Fannie Mae has also developed a Manufactured Home Appraisal Report Addendum (Form 1004C).
• This addendum will be required as a standard exhibit to Form 1004 for all manufactured home mortgage applications taken on or after August 24, 2003.
• Form 1004C expands upon the information required in Form 1004. For example, in the neighborhood section of our appraisal forms, the appraiser reports on general neighborhood trends, while the addendum focuses the appraiser on trends for manufactured homes.
• This information will help the lender better understand factors that may affect the value and marketability opinions and conclusions provided by the appraiser.
• The use of Form 1004C will help to ensure that the appraiser inspected, considered, and/or reported (as applicable) the appropriate information including, but not limited to, the:

• Manufacturers name,
• Trade or model name,
• Year of manufacture,
• Serial number,
• Certification label number(s) from either the HUD Data Plate or certification label(s),
• Type of foundation and utility connections,
• Detailed and supported cost approach,
• Opinion of the market value of the site, and
• Properties conformity to the neighborhood.

• In addition, the addendum will require the appraiser to make supplemental certifications to address his or her knowledge and expertise for the appraisal of manufactured homes.
• The sales comparison and cost approaches to value are complementary for the valuation of manufactured housing and should support the final value conclusion. The cost approach must, at a minimum, contain the information indicated on the Manufactured Home Appraisal Addendum Report (Form 1004C). The appraiser may choose to report the results of the cost approach in one of several ways:
• Our new Manufactured Home Appraisal Report Addendum (Form 1004C);
• Appraisal Form 1004, as long as the appraiser supplements Form 1004 with any needed information; or
• Through the use of a report form from a published cost service as an addendum to the appraisal report form.

• Whatever format the appraiser chooses to report the cost approach, the information must be sufficient to allow the lender to replicate the cost figures and calculations. Form 1004C includes the minimum level of detail for the cost approach that the appraiser should provide on each appraisal report.

Purchase Money Transactions

• Fannie Mae has modified our policy to require the lender to provide the appraiser with a complete copy of the executed contract for sale of the manufactured home and land, or if the manufactured home and land are being purchased separately, the executed contract for each.
• In addition, the lender must provide the appraiser with a copy of the dealer invoice if the  manufactured home is new.
• The appraiser must analyze the contract (and dealer invoice for new homes) and summarize his or her analysis in the appraisal report.
• The appraiser must not include in his or her value conclusion any non-realty items such as insurance, warranties, furniture, etc.
• Our appraisal report forms require the appraiser to develop an opinion of value solely for the real property as completed (consisting of the manufactured home, site improvements, and the land on which the home is situated) that is the subject of the appraisal.

New Manufactured Homes, Not Yet Attached to the Land/Not Yet Constructed

• An appraisal may be based on either plans and specifications or an existing model home. In such cases, the lender must obtain a certification of completion before it delivers the mortgage to us.
• This certification must be completed by the original appraiser if possible or if not possible, by a substitute appraiser.
• He or she must verify and state that the improvements were completed in accordance with requirements and conditions in the original appraisal report.
• The appraiser must also verify the information from the HUD Data Plate. Photographs of the completed improvements (attached to the permanent foundation) must be included.

Property Specifications

• The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area.
• It must also have competitive utilities, street improvements, adequate vehicular access, and other amenities. Since amenities, easements, and encroachments may either detract from or enhance the marketability of a site, the appraiser must reflect them in his or her analysis and valuation.
• In addition, the appraiser must comment on them if the site has adverse conditions or is not typical for the neighborhood.

Appraiser's Opinion

• The appraisers opinion of value must be based on the characteristics of the subject property, including the site area. The appraisal report must also indicate whether or not the site is compatible with the neighborhood.
• The appraiser should also comment on the conformity of the manufactured home to other manufactured homes in the neighborhood.
• If the site or manufactured home is substantially nonconforming with the neighborhood such that a reliable appraisal cannot be made, the mortgage is not eligible for delivery to us.

Sources Of Manufactured Housing Data

• Traditional appraisal data sources do not provide enough quality manufactured home data for the appraiser to develop a supportable and well-documented manufactured home appraisal.
• While sources such as MLS and public records are important, the appraiser must develop other data sources such as manufactured home dealers and construction companies/builders experienced in the installation of manufactured homes.
• One important source of manufactured housing information is the N.A.D.A. Manufactured Housing Appraisal Guide
• This publication lists general manufactured home depreciated replacement values based on original factory construction categories.
• The publication offers a step-by-step process for arriving at the average retail book value for a manufactured home and can be used to develop a cost approach
• It is important to note that the N.A.D.A chart values assume the home is in average condition.
• The publication provides definitions for excellent, good, average, fair, and poor condition.
• Another source of information is the Marshall & Swift Residential Cost Handbook. Marshall & Swift provides information that allows the user to arrive at an estimate of the cost of the manufactured home when new (i.e., replacement cost) based on, among other things, the construction quality. It provides an explanation of the items that allow the appraiser to support his or her conclusion of the overall construction quality of a manufactured home. This is important since condition and quality play a very important role in the value and marketability of manufactured homes.
• When the appraiser completes the Manufactured Home Appraisal Report Addendum (Form 1004C), he or she must support his or her opinion about both the quality and the condition of the manufactured home.
• The N.A.D.A. Guide or the Marshall & Swift Handbook can be used as additional sources to provide support for the appraisers conclusions about the quality and value of a manufactured home.

Desktop Underwriter (DU)

Effective Dates

Refer to effective dates above under "Effective Dates" heading (at the top of these guidelines).

Maximum LTV/CLTV/HCLTV Chart for Mortgages Secured by Manufactured Homes (1)

(1) The following are not permitted with manufactured homes:Flexible mortgages, HomeStyle Renovation mortgages, InterestFirst mortgages, construction-to-permanent transactions, leasehold estates, and investment properties.

I included HomeStyle Renovation, even though we do not have it formatted because we are not masking programs with agencies and I wanted to be as accurate as possible and not be misleading.

Purchase Transaction

• Purchase money transactions are those in which the proceeds are used to finance the purchase of the manufactured home.
• Proceeds may also be used to purchase the land, or the land may be previously owned by the borrower, either free of any mortgage or subject to a mortgage that will be paid off with the proceeds of the new purchase money mortgage.
• The borrower does not receive any money back with a purchase money mortgage.
• The sales price of the manufactured home may also include bona fide and documented transportation, site preparation, and dwelling installation at the site.
• The purchase price of any personal property items (non-realty items) in conjunction with the purchase of the manufactured home must be deducted from the sales price and cannot be financed as part of the mortgage.
• The lender must calculate and enter the sales price, land value, and appraised value according to the guidelines.
• It is incumbent upon the lender to establish the correct values for the purchase price of the home, the land value, and the appraised value, and to enter the data correctly in the loan application.

Newly built Manufactured Home

For a purchase transaction involving a newly built manufactured home that is being attached to a permanent foundation system, the following values must be calculated by the lender and entered in DU:

• In "Line a" of Section VII, enter the sales price of the manufactured home, and
• In "Line c" of Section VII, enter the value of the land based on the following:
• If the borrower purchased the land more than 12 months preceding the loan application date or if the borrower acquired the land at any time as a gift, inheritance, or other non-purchase transaction  the value of the land will be its current appraised value.
• If the borrower purchased the land 12 or fewer months preceding the loan application, the market value of the land will be the lesser of the lowest sales price at which the land was sold during that 12 months or its current appraised value.
• Enter the appraised value based on the "as completed" appraised value of the manufactured home and land.
• Defining land Value: The land value on Line c of the Details of Transaction must be determined based on (1) if the land was purchased more than 12 months from the application date, or if acquired as a gift or other non-purchase transaction, the value of the land will be its current appraised value; or (2) if the land was purchased 12 or fewer months from the application date, the value of the land will be the lesser of the lowest sales price at which the land was sold during that 12 months or its current appraised value.

Data Entry Tip:

For the purchase of a newly built manufactured home, enter the sales price of the home in Line a of Section VII and enter the value of the land (as defined directly above) in Line c of Section VII. Enter the "as completed" appraised value in the Additional Data screen.

Already Existing Manufactured Home

For a purchase transaction involving a manufactured home that already exists on its permanent foundation, the following values must be calculated by the lender and entered in DU

• In "Line a" of Section VII, enter the sales price of the manufactured home and land, and
• Enter the appraised value based on the lesser of the following:
  • If the manufactured home was built in the 12 months preceding the loan application date, the lowest price at which the home was previously sold during that 12 month period plus the lower of the current appraised value of the land or the lowest price at which the land was sold during that 12 month period (if there was such a sale), or
  • The current appraised value of the manufactured home and land.

Data Entry Tip:

For the purchase of an existing permanently affixed manufactured home, enter the sales price of the home and the land in Line a in Section VII. Enter the appraised value (as defined directly above) in the Additional Data screen.

Limited cash-out refinance transactions

Refinance transactions for manufactured homes may involve the payoff of liens (if the home and land were encumbered by separate liens) or the payoff of a single lien (if the home and land were encumbered by one lien).

• The appraised value is used by DU to determine the maximum LTV/CLTV/HCLTV ratios.
• The lender must calculate the appraised value according to the guidelines stated in Announcement 03-06.
• The appraised value is based on when the borrower acquired the home and whether the home and land are secured by separate liens or a single lien.
• The appraised value may also be based on the lowest sales price of the home in the 12-month period preceding the loan application. The land value is based on when, and under what circumstances, the borrower acquired the land. It is incumbent upon the lender to establish the correct appraised value and to enter the data correctly in the loan application.

DU Entry

Enter the appraised value in DU based on the lower of the following:

• The current appraised value of the manufactured home and land, or
• If the manufactured home was owned by the borrower for less than 12 months on the loan application date and
  • If the home and land are secured by separate liens, enter the lowest price at which the home was previously sold during that 12 month period plus the lower of the current appraised value of the land or the lowest sales price at which the land was sold during that 12 month period, or
  • If the home and land are secured by a single lien, enter the lowest price at which the home and land were previously sold during that 12 month period.

Data entry tip:

For limited cash-out refinances secured by manufactured homes, enter the appraised value (as defined directly above) in the Additional Data screen.

Cash-out refinance transactions

• The borrower must have owned both the manufactured home and land on which it is permanently affixed for at least 12 months preceding the date of the loan application. The loan term must be less than or equal to 20 years with a maximum LTV/CLTV/HCLTV of 65%.
• Enter the current appraised value of the manufactured home and land.

Data entry tip:

For cash-out refinances secured by manufactured homes, enter the appraised value (as defined directly above) in the Additional Data screen.

Ineligible loans

Mortgages secured by manufactured homes that have any of the following characteristics are not eligible for delivery to Fannie Mae and will receive an "Ineligible" recommendation from DU:

• Investment property
• Leasehold estate
• Rent credit (lease-purchase funds)
• Temporary interest-rate buydown
• Flexible mortgage
• HomeStyle® Renovation mortgage
• InterestFirst mortgage
• Construction transaction
• Construction-to-permanent transaction*
• Refer with Caution recommendation
• EA-Level III recommendation
• MyCommunityMortgage loan

* As noted above, the selection of Construction or Construction-to-permanent will result in an Ineligible recommendation from DU. However, certain types of construction-permanent transactions secured by manufactured homes are acceptable for delivery to Fannie Mae based on the characteristics of the transaction as described below.

Construction-to-Permanent exceptions

• A transaction that involves the conversion of interim construction financing to permanent financing is eligible for delivery to Fannie Mae provided the manufactured home (including installation) is 100% complete as evidenced by the appraiser's certificate of completion and provided the LTV is calculated in accordance with the guidelines in Fannie Mae Announcement 03-06.
• These transactions should be submitted to DU as either a purchase or a refinance. If the home and land are both encumbered by a lien, or separate liens, that were obtained by the borrower for the purchase and permanent installation of the manufactured home, and the borrower holds title to the lot and wishes to refinance the existing lien(s) into permanent financing, then the loan purpose should be entered as a refinance. On the other hand, if the home is not already "owned" by the borrower (although the land may be), and the subject transaction is for the purpose of obtaining interim financing that will be modified to permanent financing, the loan should be entered as a purchase.

Desktop Underwriter processing

• Du applies the manufactured home underwriting, eligibility, and appraisal guidelines when manufactured home is selected as the property type in the loan application.
• DU assigns a different level of risk to mortgages secured by manufactured homes than is does to mortgages secured by site-built homes.
• As outlined in Announcement 03-06, mortgages secured by manufactured homes represent a unique credit risk; Therefore, DU assigns a higher level of risk to mortgages secured by manufactured homes than it does to mortgages secured by other types of properties.

Down payment

Borrower Contributions

The borrower must make a 5% minimum down payment from his or her own funds on a purchase transaction.

• DU will not consider the borrowers liquid funds in determining the borrowers minimum contribution to the transaction.
• DU will determine if the borrower is making the required down payment from his or her own funds based on the cash from borrower, cash deposit on sales contract, and borrower paid fees entered in Section VII.
• The following data fields are used by DU to calculate the borrowers contribution:

Cash from the borrower (in Section VII, Line p)

+ Cash deposit on sales contract (in Section VII, "Other Credits")

+ Borrower paid fees (in Section VII, "Other Credits")

- Gift funds (in Section VI A, "Cash-gift")

= DU's estimate of borrower contributions

• If DU determines that the borrower is not contributing 5% from the data fields described above, the loan will receive an "Ineligible" recommendation. DU will return a message stating that, based on the data entered, it appears that the borrower is not contributing the minimum required 5% down payment for this manufactured home transaction.

Trade equity from the borrower's existing manufactured home may be used as part of the borrower's minimum down payment requirement as stated in Announcement 03-06. Information on the existing manufactured home can be entered in the loan application as Pending Sale in Section VI R. DU will apply the standard formula (present market value X 90% less mortgages/liens) to calculate the net equity. To override DU's automatic calculation, enter the amount of net equity in Section VI A. When calculating the market value of the existing manufactured home that is being traded, the lender should do so in accordance with the guidelines stated in Announcement 03-06.

Land equity may be credited toward the borrower's minimum down payment requirement when the borrower holds title to the land on which the manufactured home will be permanently attached as stated in the Announcement. The lender must calculate the land equity according to the instructions in the Announcement and enter the amount of land equity as "Other" in Section VII, under "Other Credits". As stated above, DU does not consider the nonspecific other credits in determining the borrower's contribution; therefore, if DU is unable to determine that the borrower is contributing the required 5%, DU will return a message advising the lender to verify the 5% borrower contribution.

Other Credits

In addition to the two types of credits identified above (cash deposit on sales contract and borrower paid fees), there are a number of other types of credits that can be entered as "Other Credits" in Section VII.

• Some loan origination systems do not map certain types of credits to DU. For example, a lender may enter "borrower paid fees" in its loan origination system, and that data may transfer to DU as a nonspecific credit type, such as "Other". Because there are a number of nonspecific other types of credits that could be entered, DU does not consider a credit that is entered, or mapped, as nonspecific credit (such as "Other" credit) toward borrower contribution.
• If DU is unable to determine that the borrower is contributing the required 5% down payment due to data entry in the nonspecific credit field, the system will return a message stating that DU is not able to determine if the borrower is contributing the minimum required 5% down payment from his or her own funds for this manufactured home transaction. The lender must verify that the borrower is making the required minimum contribution; otherwise the case is not eligible for sale to Fannie Mae.

Trade Equity

• Trade equity from the borrowers existing manufactured home may be used as part of the borrowers minimum down payment requirement as stated in the Announcement 03-06.
• Information on the existing manufactured home can be entered in the loan application as Pending Sale in Section VI Real Estate Owned.
• DU will apply the standard formula (present market value X 90% less mortgages/liens) to calculate the net equity.
• To override DU's automatic calculation, enter the amount of net equity in Section VIA. When calculating the market value of the existing manufactured home that is being traded, the lender should do so in accordance with the guidelines.

Land Equity

• Land equity may be credited toward the borrowers minimum down payment requirement when the borrower holds title to the land on which the manufactured home will be permanently attached.
• The lender must calculate the land equity according to the instructions in the Announcement and enter the amount of land equity as Other" in Section VII, under "Other Credits".
• Details of Transaction, under "Other Credits". As stated above, DU does not consider the nonspecific other credits in determining the borrower's contribution; therefore, if DU is unable to determine that the borrower is contributing the required 5%, DU will return a message advising the lender to verify the 5% borrower contribution.

Community lending products secured by manufactured homes

With the exception of MyCommunityMortgage, Community Lending products are eligible subject to the maximum LTV/CLTV/HCLTV ratios, loan terms, and other criteria for mortgages secured by manufactured homes. For example, a 95% Community Home Buyers Program" mortgage with a loan term ≤ 20 years will be eligible. On the other hand, a Fannie 3/2" mortgage where the borrower is not contributing 5% from his or her own funds will not be eligible.

DU recommendations

Mortgages are eligible for delivery to Fannie Mae based on the DU recommendations.

• Loans that receive an Approve/Eligible or Refer/Eligible recommendation, or for lenders participating in our EA/TPR initiative, an EA-I/Eligible or EA-II/Eligible recommendation, are eligible. The TPR option is available for manufactured home transactions.
• Loans that receive a Refer with Caution recommendation, or for lenders participating in our EA/TPR initiative, an EA-III or RWC-IV recommendation, are not eligible for delivery to Fannie Mae.

Special Feature Code

• Lenders must use Special Feature Code 235, in addition to all other applicable special feature codes, when delivering mortgages secured by manufactured homes to Fannie Mae.
• DU returns a message in the Fannie Mae Underwriting Findings report to remind lender of the special feature code that is required for mortgages secured by manufactured homes.

Appraisal and Property Requirements

Refer to "Property Eligibility" section above.

Property fieldwork recommendation

• DU requires an appraisal on Form 1004 and the addendum Form 1004C for manufactured homes. In addition, if the manufactured home is located in a PUD, condominium or cooperative project, the lender should select Manufactured Home: Condo/PUD/Co-op as the property type.
• In those cases, DU will return a message instructing lenders to verify that the loan complies with Fannie Mae's project review requirements.

Entering property type

• The user should determine whether the property is a manufactured home before submitting the loan to DU..
• When the property is a manufactured home, the user should identify the property type as a manufactured home prior to the initial submission to DU.
• Any change to the property type will require that the loan be resubmitted to DU, which could result in changes to the underwriting recommendation and the property fieldwork recommendation.

Data entry tip:

The manufactured home indicator is in the Subject Property Type field in the Additional Data screen.

DU messaging related to property type

• When the property type is entered as a manufactured home, DU will return a message acknowledging that the subject property was submitted as a manufactured home.
• The lender must verify that the property is legally classified as real property and that it meets the manufactured home guidelines established in Fannie Mae Announcement 03-06.
• Furthermore, when a property is not submitted as a manufactured home, DU will check the subject property address against manufactured home property addresses in our database.
• If our database indicates that the property may be a manufactured home, DU will return a message alerting the user. DU’s issuance of this message does not necessarily mean that the property is a manufactured home, nor does the absence of this message indicate that Fannie Mae accepts the accuracy of the property type as it was submitted.
• The lender must research the subject property type and, if it is determined that the property is a manufactured home, the lender must correct the property type and resubmit the loan to DU.
• If the lender determines that the property type is not a manufactured home, the loan may be delivered with the appraisal recommendation provided by DU.

Note: The lender may be required to repurchase a loan that was delivered to Fannie Mae if the property type was not correctly identified as a manufactured home when the loan was underwritten with DU or if the loan was not properly identified with Special Feature Code 235 at the time of delivery.

Eligible loan transactions

Manufactured homes may be financed with fully amortizing fixed-rate mortgages, 7/1, or 10/1 ARMs up to a maximum term of 30 years. Purchase and limited cash-out refinance transactions are permitted on principal residences and second homes. Cash-out refinance transactions are permitted only on principal residences where the borrower has owned both the home and the land for at least one year and the loan term does not exceed 20 years.

The property must be located within the United States (including the District of Columbia), Puerto Rico or Virgin islands.

Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

[Geographic Restrictions]

[Underwriting Options]