Sunday, May 12, 2013

Modular Home Builders Cautious of Mortgage Landmines

Mortgage lenders are busy these days helping with refinancing and new home purchases as well as construction loans for buyers wanting to build a new home but one group of new home builders is having a hard time enjoying the recent new home revival.

Those men and women that build modular homes for a living are constantly having to battle not only uncooperative code enforcement people, the public's prejudice that comes with building a modular home but they also have to deal with a lot of uninformed lending officers.

"But we don't offer any mortgages for building modular homes."

Recently a group of modular home builders met and expressed their need for a little love from lenders.

Here are just some of the things that drive modular home builders crazy:

I can't live with the draw schedule: Every modular builder has run into this. The bank's draw schedule for a site builder works well for both the bank and the site builder but is impossible to use by a modular home builder. Too often the mod builder is given the site builder's draw schedule and told that this is it, few or no changes. Every mod builder knows that this draw schedule sucks. Since the home comes from the factory complete except for final finishing, the third draw has to be much larger than the bank is usually willing to give them which in turn puts the mod builder in a position to have to explain AGAIN why they need so much money in the middle draw. It gets frustrating.

I want to use my local bank. Whenever a mod builder hears this, the hairs on the back of their neck starts to tingle. The local bank's mortgage officer may have never done a modular home loan before and the thought of having to do one doesn't excite them very much. Too much banking red tape to go through just to process one loan per year for a modular home. Instead, I heard of some small local banks actually telling the home buyer that if they found a local site builder they would have no problem getting a loan.

The buyer has to cosign your draw check. What could go wrong with this scenario? Just about everything and it usually does. The home buyer went on vacation for two weeks before the house is finished leaving the builder with a check they can't deposit in their bank account to pay bills. The home buyer is having a tough time with you because nobody has been to their house for 3 days and he is holding your check hostage until someone shows up even though the check is for completed work. Or my personal favorite, the home buyer wants to hold your last draw check hostage for a couple of weeks after they move in to insure that you come back to fix things.

What is needed is for a couple of large regional banks to prepare a modular home draw schedule that fits the mod builder's needs and teach all the mortgage lenders how to work with home buyers that want to go modular. How many more home buyers do you think would go modular if the banks made it as easy to get a home loan as they do for the site builder?

1 comment:

Brandy said...

This is exactly what we are dealing with and doesn't seem to be getting any easier. It's even better when their bank agrees to use our draw schedule and then all the sudden they don't agree to draw number 4 or which ever. We should all be able to work with each other since the end result is the same for everyone. We all have a customer and a product that we want to sell and make happy. It doesn't help though when a fly by night builder comes in and low balls people then takes their money and runs. We do more educating our customers than anything else. Making sure they don't get scammed.