Investing in Mobile Homes after June 1 HUD Safe Act

56 Replies


Does anyone have any strategies in place for mobile home investing after June 1st when the HUD Safe Act starts which will eliminate almost all seller financing? I was really hoping to try mobile home investing this summer but now I don't know what to do :cry:

I've read a little bit about it but I'm still in the dark with most of it. How are they planning to stop owner financing? I wonder if it will be like the 'required' MH dealer's license that you can get by without.

Anyone else have any insight to this?

Here is quote from one of the bigger pockets posters on another thread.

I think your realtor has some bad information. New Hud rules about owner financing were to go into effect April 1 but have been delayed till June 1. The rules do not eliminate owner financing on single family homes, they do state that a registered mortgage originator needs to be employed to "originate" the loan. This would entail taking this deal to a mortgage originator who would originate the paperwork, get all disclosures signed, and make sure the financing does not violate HUD guidelines (if you think this is uncalled for interference by a now socialistic leaning government in private business affairs you are right!). The seller can still provide the financing, obviously the cost will be increased by the fee charged by the mortgage originator. Although I expect that once this HUD mandate takes effect the fees will be all over the board, there is actually no reason that they should be charging any more than an attorney would per hour.

Here is a link to the thread

I hope that Don is correct that it will still be possible to do owner financing. I guess I'll just have to charge the person buying the mobile home an up front fee to pay off the mortgage initiator who did the paper work.

As an added bit of information, there is some question as to whether a mobile home (without sale of the real estate) would even be covered by the act. There is a valid interpertation that considers a mobile home itself (no land) as not being a real estate asset. My advise on all of it is to just consider that the cost of doing business will increase by a relatively small amount of money and that many people will not bother to comply with the regulations. The gov't will of course have to make examples out of a few of the violators to try to give the impression that the law is being enforced. Eventually a less socialistic administration will be elected, this particular HUD rule will be dropped, and all will be forgiven for any violators.

As a real estate investor investing in MHP's, I happen to pick up some used MHs over the years. Does that change my status from investor to dealer? I say no - I am still an investor and am selling MHs on the side with Owner financing.

In Texas a Mobile Home is NOT Real Property but personal property. It can be made into real property if you wish. But I would see no need for that unless you are selling a land home deal and need bank financing.

forget the owner finance. Do a lease option, givem a rent credit. Keep the asset for depreciation purposes and carry on until somebody runs these progressives outta office

Hi under the SAFE Act, any financial arrangement that takes a security interest in the property may be construed as a mortgage or installment purchase agreement. A mobile home is specifically included as the Act defines property as being 1-4 family residential properties. There was alot of flak from mobile home dealers about this point.

There are other bills being debated that will or could modify these issues.

Remember that this law is only applicable to "Origination" of a mortgage. That owner occupants selling their own property are exempt, one in three years. Doing a Lonnie Deal can still be accomplished as an assumption rather than originating a new loan. I will cover this in detail later on. Good luck, Bill

We are really enjoying this forum. There's some exciting stuff here!

Originally posted by Richard Graham:
forget the owner finance. Do a lease option, givem a rent credit. Keep the asset for depreciation purposes and carry on until somebody runs these progressives outta office

Is there a disadvantage to doing lease option rather than owner financing? For example, would you be responsible for any repairs if it was a lease option, but not have this responsibility with owner financing?

No, probably not, check with your state statutes concerning the SAFE Act issues. The "Option" you use may well be defined as an installment sale. Options are specifically mentioned in the SAFE Act to be addressed. How the option is structured and it's duration may play a role in determining how it is viewed. Short term contract extensions might be you best option (pun intended). If you don't care for such provisions, I'd suggest you use a mortgage originator, if you can find one and do the note and deed/title. Bill

All the info that has been put out refers to mortgages. Mortgages are placed on real property. Mobile homes in a MHP are personal property and do not require a mortgage for financing.

No mobile homes in parks are not considered real property and are in fact chattel. Still as I read the law it does mention mobile homes and installment sales and specifically states that if you are quoting terms such as down payments, rates and payments then you need to be licensed if you are doing this on a professional basis. This does not include a seller selling his personal residence as mentioned above. In Michigan the Manufactured Housing Association is encouraging all park owners, dealers and sales people to get liscensed if they are going to be quoting terms regardless if they are using seller financing or not. There is currently little or no enforcement in place and there is a big push in the industry to get mobile homes in parks excluded. It will be interesting to see how this all shakes out in the next couple of years. Right now there is a lot of confusion over the issue and a lot of folks holding off on getting liscensed until the law as it is going to be applied state to state is more clear.

Just a thought but what about changing the way we sell the homes? For example instead of selling a MH for 5k $1,000 down with a balance of 4k owner financed, sell the mobile home on paper for $1,000 and charge 4k for the repair services or as a type of assignment or finders fee.

Hi, MHs are PERSONAL PROPERTY unless afixed and changed to REAL PROPERTY. There is NO distinction between the types of property, that is irrelevant, it is if the RESIDENCE is a single family home or not, 1 to 4 family. If a mobile home has been used and is used and is modified as an office, it's not a residence, seller finance away!

If the MH is designed and used as a residence then it is a covered transaction IF it is NON-OWNER OCCUPIED. If you live there, seller finance away! If the owner of a park owns fifty homes, obviosuly he does not live in all fifty, where it is located is irrelevant and a non-owner occupied residence.

Read the Act, it's pretty clear in the description of any transaction that takes a security interest in a residential non-owner occupied property. Even lots, without homes on them, that are intended to be used for residential homes are included!

Originally posted by Richard Graham:
forget the owner finance. Do a lease option, givem a rent credit. Keep the asset for depreciation purposes and carry on until somebody runs these progressives outta office

Richard, We are brothers of the same, I like someone that thinks the same as me. Good work

Hi, I have not seen a lease/option contract, strategy or program to date that is structured sufficiently to avoid it from being classified as an installment financing arrangement or mortgage.

Investors need to consult with their attorney and review these contracts for compliance with state laws being adopted in connection with the SAFE Act as well as the Act itself.

If a security interest is held by the Optionor/mortgagor/Lessor, you likely have a problem.

I'm not sure if this went into effect or not and I currently do not sell on contract so I am not too worried about it. However, it would seem to me that owner financing or selling on contract is different from a loan, when you get a loan to buy something, the seller gets all of the proceeds whereas if you sell it on contract, you are taking payments. In my mind, that is not a loan. I am not a lawyer and I do not play one on tv either! LOL

Just want to add to this post. Here is an article talking about more regs to "make it more fair for the poor consumer".

When you combine that with Frank-Dodd and SAFE, pretty much makes a mess. So many regs to keep up with, lots of fees going to licensing and attorny and now mortgage originator... Where does it end?

Or is it just BS? If you are buying on the cheap, fixing, and then selling with owner financing (houses and MHs), do you need to worry about these? Should you run every deal through a licensed originator, and get other licenses yourself?


One more thing, what will this do to the note industry? Private notes will get more expensive/more difficult/less supply?

Anyone see this happening, or can anyone explain why it will not happen?

Marc, Bill, I especially value your extensive wisdom.



Anthony, you dug deep to ask that question! LOL

The problem I see, from experience with notes is that when a seller financed note is sold the borrower, about a third of the time, questions the validity of someone being able to buy the note. I have been told by borrowers that I could not buy the note without their consent.

You'll find that most borrowers in small privately held notes are unaware that their note can be sold by the holder, but that lack of education may be changing with the advertising for notes and annuities like that on TV. Along the same lines of the borrower being unaware, I also found that collections and foreclosures were more adversarial.

More "private mtg" borrowers were more likely to obtain legal advice when they had significant equity and were in default or pending foreclosure. I recall one individual who insisted that his payoff would be what was paid for the note at a discount! His attorney even tried to justify that line of reasoning.

Sorry this is so long, but it ties together.

Point is that if you buy a note later on that should have been originated under the Safe Act and was not and it goes to foreclosure, you may have a problem.

In any basic business law class, you'll learn that a contract or agreement that is in violation of law is unenforceable. At the very least, a note that is contested can be difficult to foreclose on or collect and I can see where some really conservative judge might bend toward the note holder to the extent paid for the note, so there would still be a loss considering court costs and expenses.

Bottom line, I would not buy any note that did note have the seal and/or registration number of the mortage originator on the original note, if I had any doubt at all that it was not made by an owner occupied originator. And how do you prove that? Due diligence is more important now than ever, IMO.

Lately, I have been talking to regulators concerning the Safe Act and how their take on the issues. So far, they have enforced the Act with several originators. The issue has already been brought to their attention by banks who were approached to refinance such obligations.

This, taken down the road, seems to say that when the borrower goes to a bank to obtain the payoff loan that the lending institutions will be reporting illegally originated notes and agreements.

On the other hand, in Missouri, the Act is being enforced very conservatively, that the originator needs to gain some benefit from the origination and that the sale price or interest is not considered beneficial. That opens some doors for investors,at least in Missouri.

On the installment issue, it doesn't matter how you color the deal, if it provides an equitable interest to obtain the title and payments are being made it falls in as an installment pruchase or financing scheme.

That's enough....

Thanks for the extensive, quick reply Bill, do you ever sleep?

Do you have any thoughts specifically on this article:


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