Homeowners negatively affected when purchasing FHA-insured manufactured homes with substandard foundations

According to the Office of the Inspector General, Audit Report Number 2007-KC-0004, of the FHA Title II insured manufactured housing loans that closed from 2003 through 2005, at least 50,000 (or more than 80 percent of the financed homes) were installed on substandard foundations.
The report went on to say that current FHA controls cannot be relied on to ensure contractors will follow required guidelines. As a result, FHA’s insurance fund and manufactured homeowners are not adequately protected and, homeowner equity and resale values are diminished, and the structural integrity and safety of the home is compromised. The federal manufactured housing program was established by Congress to protect the health and safety of the owners of manufactured homes and to reduce personal injuries, deaths, property damage, and insurance costs while improve the quality and durability of manufactured homes. The report also states; homeowners are negatively affected when purchasing FHA-insured manufactured homes with substandard foundations. For example, homeowners were not getting the permanent foundations that they expected and paid for; therefore, the homes were likely to have been overvalued and the mortgages over insured. Homeowners with non compliant, substandard foundations also experienced problems selling their homes to potential buyers seeking an FHA-insured loan. This caused financial detriment to the sellers because the pool of potential buyers is significantly reduced if buyers are unable to obtain FHA insurance on the loan. In a recent case, the lender for an FHA-insured manufactured home loan did not obtain the required engineer’s certification for the foundation when underwriting the loan. The home was installed with a substandard foundation. The homeowner later tried to sell the home and found a buyer who expected to use FHA-insured financing. The new lender obtained an engineer’s certification, which showed that the foundation did not meet FHA requirements. As a result, the homeowner lost the sale because the buyer could not obtain FHA-insured financing.
Is your foundation FHA compliant? Everyone who lives in a manufactured home should know this answer. Not only will a compliant foundation make your home feel and act more like a “stick built” home, it could add thousands of dollars to its value and give the owner the financial flexibility and power of a federally insured mortgage loan which could:
A. Lower your present interest rate and add more years to your term;
B. Provide you with cash back to reduce your debt or improve your home;
C. Allow you to seek a Reverse Mortgage, effectively eliminating any mortgage payments.
To determine if you do indeed have such a foundation, you could read the following in the HUD Handbook 4930.3G, Permanent Foundations Guide for Manufactured Housing (Guide)
Perimeter Enclosure
The Guide requires manufactured homes to have a properly enclosed crawl space with a continuous permanent foundation-type construction. The perimeter must be adequately secured to the unit to exclude entry of vermin and water and allow proper ventilation of the crawl space.
Piers
The Guide requires all masonry piers to have mortared bed and head joints. Dry-stacked piers are not acceptable.
Footings
The Guide requires that pier footings be reinforced concrete and the base of the footing be below maximum frost-penetration depth.
Anchorage
The Guide requires manufactured housing units to be permanently attached to the foundation by anchorage devices adequate to resist all loads, including resistance to ground movements and uplift caused by wind, earthquake, etc. Anchoring straps or cables affixed to ground anchors other than footings (or piers) do not meet this requirement. Screw-in soil anchors are also not considered a permanent anchorage. For more information go to www.suresafe.com.