Fannie Mae (FNMA) Mobile Home Parks:  

Fannie Mae offers a long term financing solution for land lease manufactured housing communities, where the Borrower owns the Manufactured Housing Community (MHC) sites and associated common amenities and infrastructure.

Property Eligibility:  Existing, stabilized, professionally managed MHC, with or without age restrictions, having a minimum of 50 pad sites. Not more than 25% of the Park Homes may be owned by the Park or Sponsor.  FNMA prefers 50% or more of the site can accommodate double-wide homes, while the actual number of double-wide homes may be less. FNMA like to see the physical occupancy at 85% or greater. Majority of the property and the entrance should not be located within a designated flood zone.

Eligible Sponsors:  At least one of the Sponsors should have previous experience in operating a

Mobile Home Park. Typically, this means four or more similar type and size properties (or larger) than the property being considered for financing.   What happens if you do not have this history or experience?  You may consider bringing in a minority owner that would fulfill this requirement.  We could also request Fannie Mae consider an exception to this underwriting requirement or simple move to another lender that does not have this requirement.  Fannie Mae also requires the Sponsors/Owners to be US Citizens, to have liquid assets of not less than 6-months principal and interest payments post closing.  In determining the liquidity requirement, Fannie Mae will not consider unused lines of credit, or certain qualified retirement accounts such as IRAs and 401K.  There are some possible exceptions to the retirement accounts. If the sponsor is required to take minimum distributions, a portion of these accounts can be used to meet the liquidity test. Typically, liquid assets are unencumbered; checking account balances, savings accounts, publically traded stocks, bonds, and cash value in life insurance policies.

You will receive a detailed Application from the lender. This document will outline the insurance requirements, the escrow requirements, and provide additional information on closing requirements.

How long will it take to close a Fannie Mae loan?  Normally, 50 to 60-days after the lender receives the executed Application, Application Fee and requested documents.  For example the lender will ask for copies of the historic operating statements, a current rent roll, resumes on the principals, and personal financial statements on the principals.  These documents will need to be certified as being true and correct.  Most often one of the principals provides this certification – do not confuse this with the need to get your accountant or attorney involved – the principals have already signed these certifications.

Minimum Occupancy Requirements: 85% Physical Occupancy for 90 days. 70% economic occupancy required.

Property Considerations:

  • The percentage of tenant-occupied homes (where the tenant does not own the home) generally may not exceed 25%.
  • Density is based on market norms and generally should not exceed 12 Manufactured Homes per acre for an existing community and 7 Manufactured Homes per acre for a new community.
  • With limited exceptions, all Manufactured Homes should conform to applicable Manufactured Housing HUD Code standards.
  • Leases with 2-year terms or longer cannot contain a tenant option to purchase the pad site.

Supplemental Financing:  Supplemental loans through FNMA are available.

Third party reports and other loan provisions:

  1. Appraisal – ordered by the lender – this can take between three to five weeks to complete.
  2. Title Commitment with exception documents – this can take from one to three weeks to prepare.
  3. Survey: From time to time the lender may waive the requirement for a survey, if the title company will provide acceptable survey coverage protection without a new survey. We can often help with this issue if a new survey is not available.  If a survey is required, this can be the longest lead item, especially during winter months where the ground is covered in snow.
  4. Phase One Environmental Report: The lender will engage a company to conduct an environmental inspection of the property. On older properties that have or are likely to have asbestos materials and/or lead base paint, the Environmental Report will often recommend the property owner put in place an Operating and Maintenance (“O&M”) Plan.  These plans are prepared by a third party and often costs between $400 to $500 each.
  5. Property Inspection Report, also known as the physical needs assessment: The lender will hire a company to walk at least 10 percent of the units, walk the entire exterior and common areas.  They will prepare a report outlining those areas that need repair and replacement now (“Immediate Repairs”) and prepare a schedule showing the items that will need replacement over time on an annual basis.  The most common loan term is 10-years (with a 30-year amortization).  The report will cover a period of time two years beyond the loan term (12-years in this example).  The report will adjust for inflation and arrive at an annual estimated replacement reserve amount (normally between $250 to $300 per unit per year collected monthly along with your principal, Interest, insurance and real estate tax escrow accounts).  This will be known as the Replacement Reserve.  These funds can be used to make future repairs to the property, e.g. property water heater, replace roof, repaint exterior, carpet hallways, replace heating and cooling units, etc.  Should the report find items that need Immediate Repairs the lender will most often holdback from Closing 125% of the estimated amount of the item that needs repair.  Once the work is completed the lender will release these funds to the borrower or pay direct to the contractor as instructed by the borrower.
  6. The lender will order a flood certificate.
  7. Lender will conduct a site inspection.
  8. The lender will hire an attorney to prepare the loan documents.
  9. Closing costs: $12,500 will address the appraisal, property condition report, a phase one environmental report, property condition report, lender site inspection, lender processing fee.

In addition to the costs above, you should consider the following;

  1. Lender will require a Legal Opinion from your attorney. $TBD
  2. Lender will engage outside legal counsel to prepare the loan documents and provide additional assistance to the Closing. Most often the costs for lender’s outside counsel ranges between $7,500 to $12,500.
  3. Survey; lender will most likely require a survey. From time to time an old survey can be used.  $TBD.
  4. Title Insurance; in acquisitions the Seller most often pays for the title policy, in refinances you will have to pay for this policy. The costs vary from State to State.  In Kansas this runs about $1,050 per $1 million in loan dollars.
  5. You should factor in another $500 – $600 for the title company to handle the closing and disbursements.
  6. Recording costs should also be factored in. In some states this is a few dollars while in other states this can add up to well over $1,000.  $TBD
  7. The Loan Placement Fee (Mortgage Broker). $TBD

Under this loan program Fannie Mae will increase the loan amount to allow for reimbursement of many of the above closing costs.

  1. Prepayment Penalty: Yield Maintenance.
  2. As mentioned earlier this is considered a non-recourse loan. Having said this, Fannie Mae will ask the principals to execute a guaranty that is limited to certain provisions.  For example, if the lender suffers a loss due to fraud, wasting of the subject property, environmental, misappropriation of funds and if the borrowing entity goes into bankruptcy, then the loan can become full recourse to the principal who executed this limited guaranty.  Within the industry this type of recourse is commonly referred to as “Bad Boy” provisions or “Carveouts.”
  3. The lender will require the entity that owns the property to be a Single Purpose Entity (SPE).

The quality of the park is important as is with any investment property.  While you may have heard of a Five Star Mobile Home Park Rating Guide, it is our understanding this Woodall Guide has been out of existence for well over 25-years.  If the property fits the requirements above, and can fit closing within the old Woodall 4 and 5 Star rating we would expect to see the physical attributes as being acceptable to FNMA.  Below is the old 4 and 5 Star Ratings:

Woodall four-star park: (There are two categories. See item 4K below.) Four-star parks are luxury parks. In addition to the requirement for one-star, two-star, and three-star parks; a four-star park must have the following:

4A. Good landscaping.

4B. Most homes skirted with metal skirts, concrete block, ornamental wood, or stone.

4C. Paved streets, edged, or curbed.

4D. Uncrowded lots.

4E. Underground utilities if permitted by local conditions and authorities.

4F. Most tanks, if present, concealed.

4G. Any hedges or fences must be attractive and uniform.

4H. Awnings, cabanas, or porches on most homes in southern areas. (Except double-wide units.)

4I. Most lots to accommodate large homes.

4J. Where row parking of homes exists, all must be lined up uniformly.

4K. Community hall and/or swimming pool and/or recreation program. (If a park is four-star in

all but this requirement, the fourth star will be printed as an open star, indicating a four star

park without recreation.)

4L. Excellent management.

Woodall five-star park: Five-star parks are the finest. They should be nearly impossible to improve. In addition to the requirements for one-star, two-star, three-star and four-star parks, a five-star park must have the following:

5A. Well-planned and laid out. Spacious appearance.

5B. Good location in regard to accessibility and desirable neighborhood.

5C. In some locations park should be enclosed by high hedges or ornamental fence.

5D. Wide paved streets in perfect condition. Curbs or lawns edged to street, sidewalks, street lights, street signs.

5E. Homes set back from the street.

5F. Exceptionally attractive entrance and park sign.

5G. Patios at least 8 x 30 ft. (Except double-wide units.)

5H. Paved off-street parking such as carports or planned parking.

5I. All homes skirted.

5J. All hitches concealed. Any existing tanks concealed.

5K. Recreation, some or all of the following: swimming pool (except areas with long, cold winters), shuffleboards, horseshoe pitching, golf course, hobby shop, hobby classes, games,  potlucks, dances, or natural recreation facilities.

5K. Beautifully equipped recreation hall with kitchen. Room for community gatherings. Tiled restrooms, etc.

5L. Uniform storage shed or central storage facilities.

5M. All late model homes in excellent condition.

5N. At least 60% occupancy in order to judge quality of residents which indicates park’s ability to maintain a five-star rating between inspections.

5O. All empty lots grassed, graveled, or otherwise well maintained.

5P. If pets or children allowed, there must be a place for them to run and play without cluttering the streets and yards. Most five-star parks are for adults only.

5Q. Superior management interested in comfort of residents and maintenance of park.

We welcome the opportunity to assist with the loan placement with Fannie Mae.  Contact:  Mike Caffrey (913) 402-7077.