Ch. 5

Appraisal Standards

Appraisal Standards Fannie Mae Announcement 03- 06 - Appraisal Standards "Fannie Mae will continue to require market-based property valuations for manufactured homes demonstrated by a well-developed sales comparison approach to value. This means that the appraiser must develop and report in a concise format an adequately supported opinion of market value based on the sales comparison approach to value and further supported by the cost approach to value. "The sales comparison approach to value - traditionally referred to as the market data approach - is an analysis of comparable sales, contract offerings, and current listings of properties that are most comparable to the subject property. The appraiser's analysis of a property must take into consideration all factors that have an effect on value, recognizing that a well-informed or well-advised purchaser will pay no more for a property than the price he or she would pay for a substitute property of equal desirability and utility if it were purchased without undue delay. "The cost approach to value assumes that a potential purchaser will consider constructing a substitute residence that has the same use as the property that is being appraised. This approach measures value as a cost of production. Fannie Mae will not accept appraisals that rely solely on the cost approach as an indicator of value." They will not accept appraisals based solely on the cost approach. But they do want a cost approach done - along with a sales comparison approach. "Based on our review of appraisals of manufactured homes as part of our quality assurance efforts and feedback from customers and the Appraisal Institute, we believe that the unique property and appraisal issues associated with manufactured homes will be most appropriately addressed through supplemental analysis and reporting by the appraiser. We will require the appraiser to address more directly, in a standardized format, construction quality, property condition, market acceptance, indicated value by the cost approach, and support for the contributory value of the site. Based on our research, these documentation enhancements should improve property appraisal and underwriting quality to a level more comparable with site-built housing."

Freddie Mac (cont.) The Manufactured Home must be permanently connected to utilities in compliance with the HUD Codes. Utilities include power, water, and a sewage disposal system. The Mortgaged Premises must conform to all applicable use restrictions and must be zoned for residential use, and not commercial or business uses The square footage and room dimensions must be acceptable to typical purchasers in the market area The Manufactured Home must be permanently affixed to the permanent foundation, in compliance with the HUD Codes. If the installation was prior to October 20, 2008, the foundation must be designed for the site conditions, home design features, and the loads the home was designed to withstand in accordance with the manufacturer's instructions or a design by a licensed (registered) professional engineer. The foundation must meet all applicable local, State or federal codes. Any structural modifications to an existing Manufactured Home must be approved by a licensed professional engineer or the local, State or federal authority Any improvements, modifications or repairs that affect the safety, soundness or habitability of the Manufactured Home must be completed prior to the sale of the Mortgage to Freddie Mac.

FHA Requirements Here are the requirements as listed in Handbook 4000.1 (again, with key points underlined for emphasis): "(a) Definitions "Manufactured Housing refers to Structures that are transportable in one or more sections. They are designed to be used as a dwelling when connected to the required utilities, which include the plumbing, heating, air-conditioning and electrical systems contained therein. Manufactured Housing is designed and constructed to the federal Manufactured Home Construction and Safety Standards (MHCSS) as evidenced by an affixed HUD Certification Label. Manufactured Housing may also be referred to as mobile housing, sectionals, multi-sectionals, double-wide, triple-wide or single-wide. A Manufactured Home refers to a single dwelling unit of Manufactured Housing."

Fannie Mae

Fannie Mae In July of 2006, Fannie Mae came out with guidance in the form of a publication entitled "Focus on Titling for Manufactured Homes". I will excerpt it here and on the next page. I have underlined certain points for emphasis. Fannie Mae states: "For many would-be home buyers, affordable housing is increasingly hard to find. Manufactured homes are a good alternative to traditional site-built for some of these potential buyers. Fannie Mae is committed to purchasing loans secured by manufactured housing because of the significant contribution these homes make to our ability to expand homeownership to more families across America. "For us, one of the most important issues is ensuring that the loans we buy are secured by real property consisting of the manufactured home and the land on which it is situated. Unfortunately, titling for manufactured homes is complicated by a lack of Federal standards. Individual states, therefore, have devised their own unique laws to documenting liens on manufactured homes that are real estate. This has created diverse approaches to titling. State laws take several different approaches to documenting a lien on a manufactured home that is real estate. The approaches include— Clear statutory and/or regulatory authority for recognizing a manufactured home as real property through a procedure for surrendering the certificate of title when the manufactured home is permanently affixed to the land. States that take this approach include Arizona, North Carolina, and Florida, where the law provides for issuance of a certificate of title to a manufactured home, and then for surrender and cancellation of the certificate when the home is affixed to land and the appropriate documents are filed. In a few states, such as North Dakota and Illinois, the procedures for surrender of the certificate of title are not codified, but nonetheless are recognized by state authorities. Although specific procedures for surrender of the certificate of title differ from state to state, the majority of states permit manufactured housing to become real property through surrender of the certificate of title. Statutory, regulatory, or judicial authority for recognizing a manufactured home as part of the real property, without surrender of the certificate of title. In Mississippi, for example, a manufactured home that is affixed to land under specified circumstances will become part of the real property, but the certificate of title remains outstanding. Recognizing the manufactured housing as real estate when the unit is affixed to the land without a certificate of title being issued. In some states, such as New Hampshire, this is the only available approach, while in others, it is an alternative to obtaining and then surrendering a certificate of title. Many of the states that permit manufactured homes to be treated as real estate without first being titled as personal property also have procedures for issuing a certificate of title and then surrendering it. In California, for example, a manufactured home can become real property upon affixation to the land in compliance with stated procedures, but there is also a procedure for issuing and later surrendering a certificate of title. Missouri is one of a few states where a certificate of title is not required, but if one is issued, there is no procedure for surrendering it."

Fannie Mae Announcement 03-06

Fannie Mae Announcement 03-06 Here are excerpts from Fannie Mae Announcement 03-06 dated 6/3/03. It is entitled "Mortgage Eligibility and Servicing Procedures for Mortgages Secured by Manufactured Homes". As before, I applied underlining where I felt emphasis was appropriate. Announcements are the method by which Fannie Mae disseminates changes in policies. The Announcements are available on the Fannie Mae website. "Project acceptance is required for multi-width and single-width manufactured homes if the project development is a cooperative or condominium. Project acceptance is also required if the property is a single-width manufactured home and the project is a PUD. In the case of cooperatives, both the land and dwelling must be owned by the cooperative. In the case of condominiums, both the land and dwelling must be subject to the condominium regime. For further information about project acceptance requirements, see Part XII of our Selling Guide." "The manufactured home must be at least 12 feet wide and have a minimum of 600 square feet of gross living area. Further, the manufactured home must have sufficient square footage and room dimensions to be acceptable to typical purchasers in the market area. We do not specify other minimum requirements for size, roof pitch, or any other specific construction details." So, the minimum is 12 feet wide and 600 square feet of GLA. But if the market demands more, such as 900 square feet, then we might judge smaller property to be unacceptable and be prepared to do lots of explaining and show adequate support. "The manufactured home must be attached to a permanent foundation system in accordance with the manufacturer's requirements for anchoring, support, stability, and maintenance. The foundation system must be appropriate for the soil conditions for the site and meet local and state codes." You better know what to look for as far as a foundation goes and know the local and state codes. It you are unsure, you may make the appraisal subject to inspection by a qualified person, such as an engineer. "If the property is not situated on a publicly dedicated and maintained street, then it must be situated on a street that is community owned and maintained or privately owned and maintained. There must be adequate vehicular access and there must be an adequate and legally enforceable agreement for vehicular access and maintenance. "The manufactured home must be permanently connected to a septic tank or sewage system and to other utilities in accordance with local and state requirements. "We require the improvements to be completed, and fully paid for, when the mortgage is delivered to us. Specifically, the following must be completed: site preparation for delivery of the manufactured home, attachment of the manufactured home to the permanent foundation system, permanent connection to the septic or sewage system, and permanent connection to all necessary utilities (water, electricity, gas service, etc.). Exceptions to the foregoing may be only for minor items that do not affect the ability to obtain an occupancy permit (e.g., landscaping, a driveway, a walkway, etc.), subject to all requirements and warranties for new or proposed construction provided in our Selling Guide at Part XI, Chapter 2, Section 202. Mortgages secured by existing manufactured homes that have incomplete items, such as a partially completed addition or renovation, or defects or needed repairs that affect livability, are not eligible for purchase until the necessary work is completed and fully paid for."

Fannie Mae Requirements Regarding Property Status

Fannie Mae Requirements Regarding Property Status "To be eligible for sale to Fannie Mae, loans secured by manufactured homes must meet the requirements of our Selling Guide. In regard to titling specifically, our requirements for manufactured homes include— The owner of the home must also own the land on which the home is situated, and both the land and home must secure the loan. The home must be attached to a permanent foundation on the land and comply with state and jurisdictional requirements for affixation. A mortgage, deed of trust or security deed must be recorded in the land records and must identify the encumbered property as including both the home and the land. If applicable state law provides for surrender of the certificate of title to the manufactured home when the home becomes real property, the certificate of title must be surrendered to the appropriate government authority. If applicable state law does not provide for surrender of the certificate of title, the lender must indicate its lien on the certificate and must ascertain that no other liens are recorded thereon. The home must be real property. "Although we prefer that the loan be secured by a single lien on both the manufactured home and the land on which it is situated, some state laws do not provide for a single lien. If a single lien is not legally recognized under state law, Fannie Mae accepts a loan documented by a lien on the land evidenced by a mortgage or deed of trust and by a real estate lien on the manufactured home as evidenced on the certificate of title or other document. Loans in which there is a chattel lien on the home plus a real estate lien on the land, however, are not acceptable to us.

Fannie Mae Selling GuideFannie Mae Selling Guide

Fannie Mae Selling Guide In Section B4-1.3-03 of the Fannie Mae Selling Guide, it says: "Fannie Mae purchases loans secured by modular homes built in accordance with the Uniform Building Code administered by state agencies responsible for adopting and administering building code requirements for the state in which the modular home is installed. Fannie Mae does not have minimum requirements for width, size, roof pitch, or any other specific construction detail for modular homes." "Fannie Mae purchases loans secured by prefabricated, panelized, or sectional housing. These properties do not have to satisfy HUD's Federal Manufactured Home Construction and Safety Standards or the Uniform Building Codes that are adopted and administered by the state in which the home is installed." Obviously, this is important as well, so we know which appraisal report form to use. Then, in Section B5-2.2-01, it says: "Any dwelling unit built on a permanent chassis and attached to a permanent foundation system is a manufactured home for purposes of Fannie Mae's guidelines. Other factory-built housing (not built on a permanent chassis) - such as modular, prefabricated, panelized, or sectional housing - is not considered manufactured housing and mortgage loans secured by such housing are eligible under the guidelines stated in Subpart B2, Eligibility." Section B2-3-02 was revised in 2014 to state: "Manufactured housing unit must not have been previously installed (or occupied at any other site or location), except from the manufacturer or the dealer's lot as a new unit." Added that "manufactured homes that have an addition or have had a structural modification are eligible under certain conditions."

Other Requirements

Other Requirements Fannie Mae Announcement 03- 06 - Other Requirements Other requirements include: "For purchase money mortgages, we are modifying our policy to require the lender to provide the appraiser with a complete copy of the executed contract for sale of the manufactured home and land, or if the manufactured home and land are being purchased separately, the executed contract for each. In addition, the lender must provide the appraiser with a copy of the dealer invoice if the manufactured home is new. The appraiser must analyze the contract (and dealer invoice for new homes) and summarize his or her analysis in the appraisal report. The appraiser must not include in his or her value conclusion any non-realty items such as insurance, warranties, furniture, etc. Our appraisal report forms require the appraiser to develop an opinion of value solely for the real property as completed (consisting of the manufactured home, site improvements, and the land on which the home is situated) that is the subject of the appraisal." We have additional work to do here. We have to analyze the contract and perhaps a dealer invoice. The contract should not be significantly different from other real estate contracts. If you are unfamiliar with dealer's invoices, perhaps you should stop by a manufactured home dealer and ask for an explanation of a typical invoice. The more you learn, the better off you will be. "For new manufactured homes, not yet attached to the land (or not yet constructed), an appraisal may be based on either plans and specifications or an existing model home. In such cases, the lender must obtain a "certification of completion" before it delivers the mortgage to us. This certification must be completed by the original appraiser if possible or if not possible, by a substitute appraiser as provided for in Part XI, Chapter 2, Section 202. He or she must verify and state that the improvements were completed in accordance with requirements and conditions in the original appraisal report. The appraiser must also verify the information from the HUD Data Plate. Photographs of the completed improvements (attached to the permanent foundation) must be included." It's probably easier to base your appraisal on an inspection of a model home. You can really see what it looks like, measure it, and get a good idea of the quality level of the home. "The property site should be of a size, shape, and topography that is generally conforming and acceptable in the market area. It must also have competitive utilities, street improvements, adequate vehicular access, and other amenities. Since amenities, easements, and encroachments may either detract from or enhance the marketability of a site, the appraiser must reflect them in his or her analysis and valuation. In addition, the appraiser must comment on them if the site has adverse conditions or is not typical for the neighborhood." "The appraiser's opinion of value must be based on the characteristics of the subject property, including the site area. The appraisal report must also indicate whether or not the site is compatible with the neighborhood. The appraiser should also comment on the conformity of the manufactured home to other manufactured homes in the neighborhood. If the site or manufactured home is substantially nonconforming with the neighborhood such that a reliable appraisal cannot be made, the mortgage is not eligible for delivery to us." This calls for a positive action on the appraiser's part. Don't forget that the assignment is of a different type property and calls for a unique analysis and response. Don't forget to include direct comments on whether or not the site is compatible with the neighborhood and how the subject compares with other manufactured homes in the neighborhood. "The appraiser must address both the marketability and comparability of a manufactured home by selecting comparable sales of similar manufactured homes, for example, multi-width homes to multi-width homes, etc. In order for the loan to be eligible for delivery to Fannie Mae, the appraiser must use a minimum of two comparable sales of similar manufactured homes. The appraiser may use either site-built housing or a different type of factory-built housing as the third comparable sale. When that is the case, the appraiser must explain why site-built housing or a different type of factory-built housing is being used for the third comparable sale, and make (and support) appropriate adjustments in the appraisal report. "An appraiser who is unable to locate sales of manufactured homes that are truly comparable to the subject property may decide that it is appropriate to use either older sales of similar manufactured homes or sales of similar manufactured homes that are located in a competing market so that he or she can establish a baseline for the "sales comparison analysis" and determine sound adjustments to reflect the differences between the comparable sales that are available and the subject property. The appraiser should analyze and report a sufficient number of comparable sales to support his or her opinion of value (which may require the use of more than three comparable sales in some cases). "The appraiser must not create comparable sales by combining vacant land sales with the contract purchase price of the home (although he or she may use this type of information as additional supporting documentation). If the appraiser is unable to develop a reliable appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible for delivery to Fannie Mae. "In order to further enhance the quality of manufactured home appraisals and to provide the lender with additional information to improve its ability to underwrite the appraisal, we are requiring a detailed and supported cost approach to value for all manufactured home appraisals. The procedure involved in properly developing a detailed cost approach should improve the appraiser's ability to: (i) recognize differences in manufactured home construction quality; (ii) understand the differences between the comparable sales and the subject property; (iii) extract from the market appropriate adjustments for the sales comparison analysis; and (iv) identify sales of manufactured homes that are similar enough to the subject property to use as comparable sales."

Manufactured Home Foundation "Existing Construction for Manufactured Housing refers to a Manufactured Home that has been permanently installed on a site for one year or more prior to the case number assignment date.If the perimeter enclosure is non-load-bearing skirting comprised of lightweight material, the entire surface area of the skirting must be permanently attached to backing made of concrete, masonry, treated wood or a product with similar strength and durability.Skirting refers to a non-structural enclosure of a foundation crawl space. Typically, but not always, it is a lightweight material such as vinyl or metal attached to the side of the Structure, extending to the ground (generally, not installed below frost depth)." The foundation must meet the requirements of HUD's Permanent Foundations Guide for Manufactured Housing (PFGMH). The lender is required to engage an engineer to inspect the foundation and certify it meets HUD requirements. This certification is not the appraiser's responsibility.

Foundation Enclosure HUD requires that the towing hitch and running gear (i.e., the wheels and axles) must be removed from the manufactured home. "The Appraiser must notify the Mortgagee and report deficiency of MPR or MPS if the Running Gear or towing hitch are still attached to the Manufactured Housing unit." Also, the crawl space beneath a manufactured housing unit must be properly enclosed. "The space beneath Manufactured Homes must be properly enclosed. The perimeter enclosure must be a continuous wall that is adequately secured to the perimeter of the unit and allows for proper ventilation of the crawl space." "The Appraiser must notify the Mortgagee and report a deficiency of MPR or MPS if the Manufactured Housing unit is not properly enclosed. The Appraiser must call for repairs or further inspection, if warranted."

Freddie Mac Appraisal Requirements (cont.) "COMPARABLE SALES: If the subject is in a controlled market (such as a new subdivision or project, a newly converted project or an area where the developer owns a substantial number of units), at least one comparable must be from outside the area of influence of the developer The appraiser must NOT create comparable sales by combining vacant land sales with the contract purchase price of the manufactured home. If the appraiser is unable to develop an appraisal based on at least two comparable sales of similar manufactured homes, the mortgage is not eligible"Freddie Mac and Fannie Mae have come down hard on this last point recently. You can't find a sale of a manufactured home without land and then add in the sale price of the lot upon which it was set -- either prior to or subsequent to the purchase of the home -- and "pretend" it was a normal sale which included a home and a lot. This is an unacceptable appraisal practice, which is specifically identified as such on Fannie Mae/Freddie Mac appraisal forms.

Freddie Mac Here are the property eligibility requirements from Chapter H33.2 of Freddie Mac's Single-Family Seller/Servicer Guide, Volume 1 (08/14/14)" (a) A Manufactured Home must have the following characteristics: The Manufactured Home must have been built on or after June 15, 1976 The Manufactured Home must be built on a permanent chassis in compliance with the applicable HUD Codes for Manufactured Homes (HUD Codes) in effect as of the date the Manufactured Home was constructed To evidence the Manufactured Home is built in compliance with the Federal Manufactured Home Construction and Safety Standards, both the HUD Certification Label and HUD Data Plate must be present and legible. The HUD Data Plate section of the Manufactured Home Appraisal Report (Form 70B) must be completed with the information from both sources. When either the HUD Certification Label or the HUD Data Plate is not present or not legible, Freddie Mac will accept the following as evidence of compliance: HUD Certification LabelA verification letter from the Institute for Building Technology and Safety (IBTS) End of Page

Freddie Mac (cont.) HUD Data Plate A copy of the Data Plate or substitute performance verification certificate from the IBTS, or A copy of the Data Plate from the In-Plant Primary Inspection Agency (IPIA) or manufacturer The Manufactured Home must be legally classified as real property; it must be a 1-unit dwelling that is permanently affixed to a permanent foundation in a way that makes it part of the real property The anchoring system must comply with the HUD Codes. If the Manufactured Home was installed prior to October 20, 2008, the anchoring system must comply with the manufacturer's design or a design by a licensed (registered) professional engineer. Anchoring systems refer to all components of the anchoring and support systems such as piers, footings, ties, anchoring equipment, anchoring assemblies, and any other equipment, materials, and methods of construction that support and secure the Manufactured Home to the ground. The permanent foundation must be designed for the site conditions, home design features, and the loads the home was designed to withstand in accordance with the manufacturer's instructions or a design by a licensed (registered) professional engineer. The foundation must meet all local, State or federal codes, as applicable. The Manufactured Home must be at least 12 feet wide and have a minimum of 600 square feet of gross living area

Freddie Mac (cont.) (b) A Manufactured Home must meet the following requirements: If any structural modifications or add-ons have been made to a 1-unit dwelling and any portion of the dwelling is a Manufactured Home, the Mortgage securing such property must be delivered as a Manufactured Home in compliance with the requirements of this chapter The Manufactured Home must be a 1-unit dwelling comprised of a single section (a "single-wide Manufactured Home") or multiple sections (a "multiwide Manufactured Home") The wheels, axles, and towing hitches must be removed from the Manufactured Home The land on which the Manufactured Home is situated must be owned by the Borrower in fee simple. Mortgages secured by Manufactured Homes located in a Condominium Project are eligible for sale to Freddie Mac if project eligibility is determined through a reciprocal review. See Section 42.9. A Mortgage secured by a Manufactured Home located on a leasehold estate is not eligible for sale to Freddie Mac. A multiwide Manufactured Home may be located on an individual lot or in a subdivision or Planned Unit Development. A Mortgage secured by a single-wide Manufactured Home is eligible for sale to Freddie Mac only if the Manufactured Home is located in a Planned Unit Development or if located in a Condominium Project, and project eligibility is determined through a reciprocal review. See Section 42.9.

Freddie Mac Guidelines Appraisal requirements (01/02/04) "The appraiser must: Analyze the purchase contract and review the manufacturer's invoice, if applicable, and provide comments in the appraisal report Match the serial number(s) from the HUD data plate or front frame cross member of each section of the manufactured home to the serial number(s) on the manufacturer's invoice to ensure the accuracy of the manufactured home information provided in the appraisal report" Here are some more papers you need to get your hands on. Especially for a refinance of an existing manufactured home, the manufacturer's invoice and the purchase contract may not be available. State that in the report. "The lender must determine that the appraiser demonstrates the knowledge and experience to perform quality appraisals for manufactured homes. The appraiser must: Have adequate experience and must have previously completed real property appraisals of manufactured homes Understand the unique features that affect the quality of manufactured homes and the factory construction techniques for manufactured homes Have adequate education and/or training related to the appraisal of manufactured home" Remember the COMPETENCY RULE of USPAP. Tell your lender that you took this course, or other courses. "The appraiser must: Understand the manufacturers' and federal, state and local requirements for the installation of manufactured homes Be knowledgeable concerning the local manufactured home market Have access to appropriate data sources to establish an opinion of value" End of Page

Freddie Mac Appraisal Requirements (cont.) "For a purchase transaction, the lender must provide the appraiser with a complete copy of the executed contract for sale of the manufactured home and land, or if the manufactured home and land are being purchased separately, the executed contract for each. "For a new manufactured home, the lender must provide the appraiser with: Form 500, Manufactured Home Purchase Agreement A copy of the manufacturer's invoice" I know it says must, but you won't always get it. Speak up and make sure you get your hands on these materials. "COMPARABLE SALES: At least two comparable sales must be manufactured homes of similar configuration (i.e. single section for a single section) and similar quality Site built or a different type of housing may be used for the third comparable if the appraiser explains the reason for selecting the comparable and makes and supports the appropriate adjustments in the appraisal report" That's pretty clear -- at least two comps must also be similar type manufactured homes. If you use another type of home for a third or fourth comp, make sure you give a good explanation.

HUD Certification Label "HUD Certification Label, also known as a HUD seal or HUD tag, refers to a two inch by four inch aluminum plate permanently attached to Manufactured Housing"."Manufactured Homes must have an affixed HUD Certification Label located at one end of each section of the house, approximately one foot up from the floor and one foot in from the road side, or as near that location on a permanent part of the exterior of the house as practicable. Etched on the HUD Certification Label is the certification label number, also referred to as the HUD label number. Label numbers are not required to be sequential on a multi-section house." "The Appraiser must report the HUD label number for all sections, or report that the HUD Certification Label is missing or that the Appraiser was unable to locate it." If the HUD label is missing, it may affect the eligibility of the property for an FHA-insured mortgage. Generally the property is ineligible unless the missing label is verified. It may be possible for the lender to verify a missing HUD label through the Institute for Building Technology and Safety (IBTS). This is the lender's responsibility, not the appraiser's. The appraiser merely reports to the lender that the tag(s) is/are missing.

HUD Data Plate According to HUD Handbook 4000.1: "Data Plate refers to a paper document located on the interior of the Property that contains specific information about the unit and its manufacturer." "Manufactured Homes have a Data Plate affixed in a permanent manner, typically adjacent to the electric service panel, the utility room or within a cabinet in the kitchen." "The Appraiser must report the information on the Data Plate within the appraisal, including the manufacturer name, serial number, model and date of manufacture, as well as wind, roof load and thermal zone maps. If the Data Plate is missing or the Appraiser is unable to locate it, the Appraiser must report this in the appraisal and is not required to secure the Data Plate information from another source." FHA will insure the mortgage even if the data plate is missing. However, the originating lender might have its own requirement that the data plate must be there. It is the lender's prerogative to establish standards and requirements that are more stringent than HUD's.

Manufactured Homes and Additions Handbook 4000.1 addresses the issue of manufactured homes and additions: "If the Appraiser observes additions or structural changes to the original Manufactured Home, the Appraiser must condition the appraisal upon inspection by the state or local jurisdiction administrative agency that inspects Manufactured Housing for compliance, or a licensed structural engineer may report on the structural integrity of the manufactured dwelling and the addition if the state does not employ inspectors." So if the manufactured home has an addition or other structural changes, you are required to disclose this in the report and condition the appraisal upon inspection. The lender is responsible for contacting the state agency to inspect the home, or engaging a licensed structural engineer.

Measurement of Manufactured Homes How do you measure a manufactured home for an FHA appraisal? HUD Handbook 4000.1 provides an answer: "The Appraiser must calculate GLA based on the overall length, including living areas and other projections that are at least seven feet in height. The Appraiser must not include bay windows, roof overhangs, drawbars, couplings or hitches in the length and width measurements." Manufactured houses are typically advertised by manufacturers and dealers based on their travel length, that is, the length of the house as it is towed on the road. This includes the towing hitch, which is usually approximately 3 feet in length. The actual length of the house itself is usually about 3 feet less than its advertised length. For example, a manufactured house that is advertised as 24' x 70' is usually approximately 67 feet long once the hitch is removed. As stated above, the appraiser should not include the hitch in the measurement.

Real Property Status

Real Property Status Modular, panelized, and kit homes are classified as real property, just as site built homes are. Manufactured homes may be classified as either real or personal property. Real property is defined in The Dictionary of Real Estate Appraisal, Sixth Edition, as "the interests, benefits, and rights inherent in the ownership of real estate." A previous (Fourth Edition) of this publication defined real property as "all interests, benefits, and rights inherent in the ownership of physical real estate; the bundle of rights with which the ownership of the real estate is endowed. In some states, real property is defined by statute and is synonymous with real estate." The Dictionary of Real Estate Appraisal, Sixth Edition defines personal property as "identifiable tangible objects that are considered by the general public as being 'personal', for example, furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate." About half of manufactured houses today are on rented land, mainly in rental parks. These homes generally remain in personal property status. An emerging trend is for owners to band together and own the park as a cooperative. This alleviates a lot of problems in maintaining older parks and gives each owner a share of ownership. The other 50% of manufactured houses are on owned land. Many of these have been shifted to real property status. However, this is not automatic. States must allow cancellation (also known as retirement or surrender) of title, and assessors must be willing to transfer the taxable status of the property. Many states will allow manufactured homes to be classified as real estate. However, more than a dozen states do not allow manufactured housing on leased land to be legally defined as real estate. In addition, there are 16 states that will not classify them as real estate, even if the land is owned. Fannie Mae has a new web page to help lenders comply. They offer information on titling manufactured housing as real property for all states.

Secondary Market

Secondary Market Historically, Freddie Mac and Fannie Mae have not been very involved in purchasing loans secured by manufactured homes. HUD estimated in 1998 that they funded less than 15% of manufactured home loans, compared to 55% of the overall market. Recognizing the vital role played in housing affordability by the manufactured home industry, HUD's Affordable Housing goals for Fannie Mae and Freddie Mac in 2000 encouraged them to increase their purchase of manufactured housing loans. That happened slowly over a period of years. In 2001, Freddie Mac purchased 18,000 mortgages on manufactured homes placed on owned land. In 2004, they also started purchasing mortgages of homes on lots with long-term leases. In June 2003, Fannie Mae updated its lending guidelines for manufactured homes and increased the amount of loans it purchased. It recognized that lenders must have the requisite level of expertise to understand the property, titling, appraisal, and servicing issues associated with manufactured home loans. In February 2004, Fannie Mae announced it would join with nine lenders to work towards transforming the manufactured housing market, including providing purchasers of manufactured homes nationwide access to affordable 30 year mortgages with as little as 5% down. Franklin Raines, Fannie Mae CEO, said: "We're committed to working with our housing partners to ensure access to low-cost homeownership for the large part of the population, especially seniors and people living in rural communities, that rely on manufactured housing as an affordable option."Despite the subsequent downturn in the market and Fannie and Freddie's well-publicized financial problems, Fannie Mae and Freddie Mac continue to purchase loans on manufactured homes, particularly from lenders whose manufactured housing loans employed processes and procedures that included close monitoring of the origination, appraisal, and closing functions. Manufactured home loans play a vital role in Fannie and Freddie's mission of serving low-income borrowers and meeting affordable housing goals. After a check of your understanding, we will cover guidelines and requirements for manufactured home appraisals

Selection of Appraisers

Selection of Appraisers Fannie Mae Announcement 03- 06 - Selection of Appraisers "One of the challenges a lender faces in originating mortgage loans secured by manufactured homes is choosing qualified appraisers to perform accurate valuations. An appraiser who is primarily experienced in appraising detached, site-built properties may lack the knowledge, experience, and/or sources for obtaining market data that will enable him or her to perform quality appraisals for manufactured homes. The valuation principles for appraising manufactured homes are essentially the same as for other types of residential property. However, not all appraisers are knowledgeable and experienced about the unique construction process, as well as the manufacturers' and federal, state, and local requirements for both construction and installation. A lender must not assume, simply based on the fact an appraiser is state-licensed or -certified, that the appraiser is qualified and knowledgeable to appraise manufactured homes in a specific location." We need to have both knowledge and experience in appraising this specialized type of property. That is certain. However, it's a good point they make about data sources. Sales of manufactured homes might not be commonly carried in MLS. They may be sold primarily by brokers who specialize in selling manufactured homes. They may also be sold by manufactured home dealers or sales staff in a manufactured home park. Many are also sold privately through newspaper ads or word of mouth. You may have to spend the time to do additional research and develop other than the normal sources for sales information. "Lenders should take appropriate steps to ensure that their appraisers have the requisite knowledge, experience and access to data sources that will enable them to perform accurate valuations. We recommend that the lender review the appraiser's education and experience as well as sample manufactured home appraisals. The appraiser should demonstrate, through his or her sample reports, that he or she is aware of the appropriate market data sources for the area and is able to analyze and report a well-documented opinion of market value for a manufactured home. The appraiser should be knowledgeable about the local manufactured home market and the unique construction process for manufactured homes, and have access to appropriate data sources in order to render an opinion of value for the manufactured home."

Sources of Data

Sources of Data Section B4-1.4-01 "Sources of Manufactured Housing Data Traditional appraisal data sources do not provide enough quality manufactured home data for the appraiser to develop a supportable and well-documented manufactured home appraisal. While sources such as MLS and public records are important, the appraiser must develop other data sources such as manufactured home dealers and construction companies/builders experienced in the installation of manufactured homes. "One important source of manufactured housing information is the N.A.D.A. Manufactured Housing Appraisal Guide. This publication lists general manufactured home depreciated replacement values based on original factory construction categories, and offers a step-by-step process for arriving at the average retail book value for a manufactured home and can be used to develop a cost approach. It is important to note that the N.A.D.A chart values assume the home is in average condition. The publication provides definitions for 'excellent,' 'good,' 'average,' 'fair,' and 'poor' condition. "Another source of information is the Marshall & Swift Residential Cost Handbook. Marshall & Swift provides information that allows the user to arrive at an estimate of the cost of the manufactured home when new (i.e., replacement cost) based on, among other things, the construction quality; and an explanation of the items that allow the appraiser to support his or her conclusion of the overall construction quality of a manufactured home. This is important since condition and quality play a very important role in the value and marketability of manufactured homes. The appraiser must support his or her opinion about both the quality and the condition of the manufactured home. The NADA Guide or the Marshall & Swift Handbook may be used as additional sources to provide support for the appraiser's conclusions about the quality and value of a manufactured home."

HUD FAQs (cont.) Which approaches to value are required in an FHA appraisal of a manufactured home? FHA requires the sales comparison approach in all appraisals. The cost approach is only required for new construction manufactured homes. The income approach is not required. "The Appraiser must include a sufficient number of sales to produce a credible value. The Appraiser must include at least two Manufactured Homes in the comparable sales grid." This is similar to Fannie Mae's requirement for comparable sales, in that at least two of the comparable sales must be manufactured homes. As always, USPAP rules. If the cost or the income approach is necessary in an appraisal in order to develop credible results, then that approach cannot be omitted.

VA CIRC VA CIRC. 26-06-4: MANUFACTURED HOME APPRAISAL REPORT (03/01/06) The Veterans Administration (VA) requirements for manufactured home appraisal reports are contained in this Circular. "1. PURPOSE. The purpose of this circular is to provide information to program participants on the use of the new Manufactured Home Appraisal Report (Freddie Mac Form 70B/Fannie Mae Form 1004C, dated March 2005) for Department of Veterans Affair's (VA) manufactured home appraisals. "2. BACKGROUND. At the present time, VA appraisal reports for manufactured homes (MH) appraised as real estate are required to be completed on the same appraisal report form as site built single-family residences, Uniform Residential Appraisal Report (URAR), Freddie Mac Form 70/Fannie Mae Form 1004. Our analysis of the new Manufactured Home Appraisal Report has resulted in the determination that its use is preferable to the URAR for MH appraisals, as it was specifically designed to identify MH information in detail and should allow for a more comprehensive and consistent MH appraisal report that is easier to prepare and read. "3. DETAILS. Effective immediately, the Manufactured Home Appraisal Report (dated March 2005) may be used for all VA appraisals for manufactured homes. On April 1, 2006, the use of the Manufactured Home Appraisal Report (dated March 2005) is mandatory for all VA manufactured home appraisals. MH appraisals that are completed on or after April 1, 2006, using any other form will be unacceptable. The new Manufactured Home Appraisal Report is available online at: Fannie Mae's website: http://www.efanniemae.com/sf/formsdocs/forms/1004c.jsp and at Freddie Mac's website: http://www.freddiemac.com/sell/forms/. The new Manufactured Home Appraisal Report form must be acceptably completed, including entries for all relevant questions based on personal observation. In addition, VA fee appraisers must identify and require correction of deficiencies or conditions necessary to ensure the subject property meets applicable VA minimum property requirements. Fee appraisers are expected to be familiar with State and local code laws or regulations in their locality governing manufactured homes (such as missing HUD labels, alterations, modifications, additions, component replacements), and to make appropriate requirements. The Cost Approach is not required for VA purposes, but may be completed to supplement the indicated value in the Sales Comparison Approach. Since VA relies exclusively on the sales comparison approach to value (except in very unusual circumstances), the VA value estimate (market value) should never exceed that indicated in the Sales Comparison Approach." That is a significant difference for VA. They don't require a cost approach - but if you do the cost approach it can't result in a final value opinion reconciled to a value higher than that indicated by the sales comparison approach.