HUD’s New Plan to Streamline Loans for Manufactured Housing

The Department of Housing and Urban Development (HUD) is proposing a groundbreaking plan to simplify the loans application process for those seeking to purchase manufactured homes or make property improvements. The Federal Housing Administration (FHA) recently shared a draft proposal to replace the current, program-specific loan application forms with a more universally recognized form: the Uniform Residential Loan Application (URLA).

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What Does This Mean for Borrowers and Lenders?

Currently, borrowers who wish to apply for FHA Title I loans (loans that help finance manufactured home purchases and property improvements) must fill out multiple forms. Specifically, they must complete HUD-56001 for property improvements and HUD-56001-MH for manufactured homes. This can often be cumbersome, as borrowers have to navigate through different sets of paperwork depending on their loan type.

The proposed change would replace these forms with the URLA, which is widely used in the mortgage industry. Along with the URLA, HUD plans to introduce a new addendum, the HUD-92900-TI, tailored to Title I loans. This new approach will significantly streamline the application process.

Simplifying the Loan Process

By adopting the URLA, HUD aims to modernize and simplify the application process for Title I loans. Lenders can use their existing systems to collect borrower data, reducing the need for separate, program-specific software and manual processing. This eliminates the financial burden on lenders who previously had to invest in additional software licenses or manually complete Title I-specific forms.

The hope is that by making the process simpler and less costly for lenders, lenders will be more willing to participate in the Title I programs. Additionally, this could help more Americans afford manufactured homes or make needed property improvements. HUD’s proposal encourages more participation in these programs, benefiting a more comprehensive range of borrowers.

A Step Toward Broader Access to Manufactured Housing

Manufactured homes are a growing part of the U.S. housing market, providing affordable housing solutions in many areas where the traditional housing market may need to be within reach for many buyers. The Title I loan program is vital for helping borrowers purchase these homes or improve their existing properties, and streamlining the loan application process could make these homes more accessible.

The new proposal could make it easier for borrowers to access the funding they need to secure manufactured homes. Since the URLA is already a standard form used in the broader mortgage industry, many borrowers will be more familiar with it, potentially reducing confusion and making the application process faster and easier.

Why It Matters

The FHA’s proposal comes at a critical time, as affordable housing continues to be a challenge across the U.S. The 2024 Annual Report to Congress revealed strong performance for the FHA’s Mutual Mortgage Insurance Fund (MMI Fund), which supports the stability of FHA loans. The fund’s capital ratio was 11.47% at the end of fiscal year 2024, well above the required minimum of 2%.

However, while the MMI Fund remains strong, concerns have been raised by organizations like the Mortgage Bankers Association (MBA), which highlighted that mortgage insurance premiums (MIP) may be higher than necessary. The MBA has expressed concerns that despite the fund’s healthy cushion above the minimum reserve, borrowers may still be charged higher premiums than required. Whether this issue will be addressed as part of HUD’s ongoing efforts to improve affordability and access to homeownership remains to be seen.

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What’s Next?

The proposal is still in draft form, and HUD is inviting feedback from stakeholders, including lenders, borrowers, and industry professionals, until December 18. Once the feedback period is over, HUD will review the comments and finalize any changes to the loan application process. Until then, the existing policies and forms will remain in effect.

If adopted, the new loan application process could be crucial in expanding access to manufactured housing and property improvements for many Americans. By making it easier for lenders to process Title I loans, HUD hopes to open the door to affordable housing solutions for more families, helping to alleviate some of the pressure in today’s housing market.