To the Maine State Housing Authority: This is How You Replace a Mobile Home Perfectly

What’s the point of Maine being a “Title State” when it comes to manufactured homes if every bank and the state’s leading housing agency require a mortgage to finance one?

Better yet, why on earth are banks and the Maine State Housing Authority insisting on getting mortgages from borrowers who do not own real estate and therefore in no position to grant one? To add to the already high transactional costs?

Currently a mobile home replacement project desperately needed by one of my legal clients to save her family from another perilous winter is “dead in the water” according to the banker who approved the loan because of a financing snafu. This is the fourth bank attempt.

My client’s home is located in a mobile home park organized as a cooperative. She is a member and has a perpetual right to live on her lot but does not own the land, the cooperative does. She owns the existing home located there - a dilapidated trailer manufactured in 1970 with windows and doors that do not close and pipes that freeze regularly in the winter.

The financing snafu is the bank and the Maine State Housing Authority can’t figure out how to close the deal on the new home. The seller will not deliver the home until it gets paid. This seems reasonable.

The bank and the MSHA will not close the loan, though, or disburse proceeds of a grant to pay the seller and other costs associated with the project until the new home is set on its foundation, is “Energy Star” rated, permitted to be occupied and the borrower signs a mortgage with all its additional terms.

This is not reasonable! The bank’s security interest in the new home will be perfected by its notation on the Certificate of Title. Any risks that may arise after the purchase can be mitigated by withholding a reasonable sum pending delivery, insurance and a loan guaranty by the Maine State Housing Authority.

And how about the “Energy Star” requirement? Did lawmakers consider the extra expense and red tape when they passed the law? The old home in this instance is an uninsulated wind tunnel that leaks. The new home has a 40 lb. roof load, R-30 roof, R-22 floor and R-19 exterior wall insulation but not “Energy Star” certified. Given the dire circumstances and winter approaching does it make sense from a policy perspective to deny the financing because the new home lacks the appropriate virtue signaling?

Instead of making it SO HARD for borrowers and banks to finance the replacement of old mobile homes with new ones, the Maine State Housing Authority should do three simple things: (1) guaranty chattel loans used to purchase new manufactured homes located in parks, (2) readily make exceptions to nit picking regulations such as Energy Star certification when the cost of compliance outweighs enforcement and undermines the mission of the agency to provide housing, and (3) fund grants fully up front for eligible expenses related to the replacement project subject to appropriate audit. The State of Maine transfers money into my trust account regularly when civil cases are settled. Grant money could be similarly transferred for the benefit of my client on the condition the money will be used to complete the approved project. We are talking about a $35,000 grant!

My client works hard, pays taxes and can afford a loan for a new home she desperately needs. She saved money for a deposit. There is a contractor scheduled to begin demolition work on the old home September 1st and the installation of a state-required cement slab foundation. There is a lovely new home ready for delivery in Oxford, Maine. The costs of the demolition and site work is $25,000 and not financeable.

The state has a program, theoretically, to help with loans and grants to cover expenses associated with the replacement of old homes for a reason. They are too old and unfit for human habitation! The problem is the program doesn’t work.

The financing of manufactured homes is complicated and regulated to the point of being exclusionary. If lawmakers and the Maine State Housing Authority want to actually help people get new homes, they should review how secured transactions work and simplify the loan program. Banks can make secured loans without mortgages. They do it with cars. If there is a default, the lender can repossess the home and take action in the court system to collect any deficiency.