Prefab House Buyers Get a New Lease on Homeownership : Real estate: Developers, a title company and lenders collaborate to provide lower-interest 30-year mortgages.
Gail Foy wouldn’t want to live anyplace that looks like her old vision of a mobile-home park: “a whole bunch of these homes-on-wheels plopped on a great big lot with maybe a tree at the end.” But Foy does want to own a house in the city of Santa Clarita, where she works, and she can’t afford a conventional house on a private lot there.
So, about two weeks ago, Foy put down $2,000 toward buying a house that will be constructed mostly in a factory, then shipped in two giant pieces to a plot that she plans to lease in the Canyon View Estates development in Santa Clarita. The inexpensive “manufactured” house Foy is buying will be pieced together on the site and will look much like a conventional house. The fact that Foy won’t own the land underneath it will contribute to her savings.
On top of that, Foy expects to find relatively cheap financing for the purchase because of a joint effort by Canyon View’s developer--Sun Valley-based American Diversified Properties--and World Title Co. in Burbank, as well as several different local lenders. Since late last year, the companies have worked together to make standard 30-year mortgage loans available, with interest rates up to three points lower, to people buying manufactured houses on developer-owned lots--something that had not been done before.
Because of legal technicalities, people who don’t own the land under their manufactured houses traditionally have to get 20-year personal property loans, with interest rates of around 13.5%, according to Tony Hadley, director of local government and development services for the California Manufactured Housing Institute, a trade group based in Rancho Cucamonga.
By comparison, Foy said that, through the developer, she expects to qualify for a 25-year loan at 9.6%. Foy, public information officer for the city of Santa Clarita, said: “I checked with my bank and they thought that was excellent.”
Canyon View and two similar Southern California developments--including Santiago Estates in Sylmar--are the first three projects in the country whose manufactured houses qualify for the lower-rate mortgage loans, Hadley said.
Such developments are a cross between an ordinary tract home development and an old-fashioned mobile-home park. Legally, they’re like mobile-home parks, with residents owning their homes, but not the land. But the houses in Canyon View, for example, look and are constructed more like tract houses, with fairly high ceilings, landscaped yards and garages.
Canyon View consists of about 460 house sites. Of those, 99 have already had manufactured houses built on them (paid for with personal property loans), while another 45 sites are awaiting the construction of houses whose sales are pending. The new ones will be financed with mortgage loans, said Mark Seidenglanz, vice president of American Diversified, which is owned by various members of Seidenglanz’s family.
Buyers in the Santa Clarita development choose what style and size house they want on the plot they pick, Seidenglanz said. For example, a 1,080-square-foot house with two bedrooms and two bathrooms is $68,950. Seidenglanz said the most popular model, totaling 1,617 square feet with three bedrooms and two bathrooms, costs $90,950. Monthly lease payments on the land underneath the house are additional and range from $500 for a basic site to $695 for one of the few hillside sites--with views of Santa Clarita--that are still available.
Prices at Santiago Estates--co-owned by Watt Industries Inc. of Santa Monica and the Richard A. Hall Co. in Costa Mesa--are similar to those at Canyon View. The available houses range in price from $79,900 for 1,007 square feet to $99,900 for 1,333, according to Frank Kemeny, project general manager. As at Canyon View, lease payments are additional, running from $450 to $500 a month.
It could be substantially cheaper to finance a manufactured house in either development with a 30-year mortgage loan at 10% interest, instead of a 20-year personal property loan at about 13% interest. Take a $65,000 purchase and assume that the buyer puts down 20% in cash, or $13,000. The $52,000 personal property loan would have monthly payments of $503, contrasted with $365 for the conventional 30-year mortgage, according to Hadley.
A key to qualifying the manufactured houses for regular mortgage loans was finding a title company that would cover the houses. Title companies provide insurance that protects real estate buyers from challenges about who owns a given piece of property.
For that, Seidenglanz went to World Title. “From the company’s point of view, this means more properties we can insure,” said Michael C. Lowther, president and chief executive of World Title. “And we kind of like the fact that we are involved in affordable housing.”
Robert Manuele, World Title’s chief underwriting counsel, said the main barrier to getting title insurance for manufactured houses on leased plots had always been the lack of an adequate legal description of the plot--a necessity for the insurance. The usual description is a subdivision map on file with the county, but such a map only shows ownership lines--and nothing about how a developer may have divided up a large chunk of land and leased it to others.
Seidenglanz took care of that problem by working out a system with the state Department of Housing and Community Development whereby a map showing the house plots at Canyon View was also legally filed with the county. The availability of the title insurance, in turn, made lenders more willing to make mortgage loans, Seidenglanz said.
A possible drawback for buyers of manufactured houses on leased land is that, when the lease expires, they could be forced by the owner to vacate the land. However, Seidenglanz said that his family business views Canyon View as a long-term investment and doesn’t intend to bulldoze the $18 million in streets and amenities it has put in when the leases expire in 30 years.
As for Foy, she expects to have sold her home by the time her lease expires, anyway. “I want to establish some equity and move on,” she said.
