Selling Your Home in a Tight Credit Market

(MoneyWatch)  Dear Ali;
I was told by my agent that the government halted conventional and FHA loans on mobile homes. I own a mobile home and it was set to close at the end of August. What can the buyer do now? I have to sell the house and land or I will go into foreclosure. Please help!
A: Substitute the words "new condos" for "mobile homes" and I've seen this question before: Lending is tight, how can I find a buyer? But since I don't know the manufactured home market, I turned to one of my favorite mortgage gurus, Carolyn Warren.

Warren is the author of "Mortgage Ripoffs and Money Savers," which was an insider's expose of the industry. She has been both a banker (which means she works for a firm that lets her use its capital to make loans) and a broker (which means she can shop around among different lenders for the best loan), and she told consumers the ripoff tricks of both sides. It's a book I love, and I give it to all my clients. Right now she's back being an active mortgage broker/banker while waiting for her second book to come out, so I decided to take this question to her.

Warren pointed out that in order to get a mortgage, the house in question cannot have wheels or an axle on it. "If it's a manufactured home that's just parked, and you can hitch a trailer on it and take it to Canada, you can't get a mortgage on it," she said. If you've got wheels, you need a more general lender because that situation is somewhat analogous to needing a car loan. Warren suggested either a credit union or a finance company like the Evansville, Indiana-based American General Finance, a division of AIG which does loans for college tuitions, vacations, and has something of a specialty in manufactured homes.

If, however, the home is fixed (which means it also has to be on a permanent foundation) and it was built after June 1976, then lenders will write mortgages on it. There are two problems, though. First, since mortgage insurance companies won't insure these properties, the buyer needs to put 20 percent down, Warren says. It's possible that when your agent said the government "halted" loans, he meant that there weren't loans available with low down payments, which is true. If that's the situation your buyers are in, there's no real way to end run it.

The other problem Warren noted is that it's in Fannie Mae's guidelines to put a fee on these loans. (This is a problem some of you may have hit while trying to refinance, which I wrote about in "Can I Avoid High Refinancing Fees?") The fees add up to another 2 percent, which is a charge that can be paid up front (but is expensive) or baked into the loan (which, of course, raises your buyers' interest rates).

If those requirements don't turn off your buyers, there are still lenders, Warren noted, who will write the mortgage. They include the company that she works with now, Shelter Mortgage, a division of Guaranty Bank; but it sounds like finding a lender isn't the problem -- it's meeting their criteria that's the problem. Like I said with my reference to new condos, the credit crunch is still with us, and it's hurting more than one segment of the market.

Good luck!