Start my own mortgage company for mobile home financing?

25 Replies

I am about to solidify the purchase of a fairly sizeable mobile home park in Northern Illinois. I'm thinking about the possibility of also starting a separate mortgage business so I could offer financing for those who would like to buy a new/used homes in the community.

I understand that applicants cannot be steered to any particular mortgage company but I believe I may be able to be a bit more flexible with a lending program and that should attract some good customers.

Opinions would be appreciated

What do you mean applicants cannot be steered to a particular mortgage company? As a park owner, you can suggest a particular bank, especially if you have used them before and are happy with their service. Am I missing something? Where did you hear that you could not make a financing recommendation to applicants?

It sounds like you are looking to do a lease-to-buy program, where you are the bank. In that case, you can definitely offer that option to applicants, park owners do it all the time. I would just suggest having two LLCs, one that holds the land/park and one that lends money. Best of luck!

Thank you for the reply!

I'm talking about straight mortgages (Chattel). Not too interested in the lease to buy type of arrangement.

As far as steering - yes you can recommend a financial source but in the end you must leave it up to the applicant to choose.

Again, thank you for your input.

Have you connected with @Ken Rishel yet ?  He is in this business and could give you good feedback or strategy .  He is also from Illinois as well as pretty active in the space.   

I will send you a message, as i have a park in Northern IL and good to know your neighbors!  

@William Devine If you go this route, you may need to get the licensing to do it. Check with your state. Good luck! 

Originally posted by @Matt Souza :

What do you mean applicants cannot be steered to a particular mortgage company? As a park owner, you can suggest a particular bank, especially if you have used them before and are happy with their service. Am I missing something? Where did you hear that you could not make a financing recommendation to applicants?

It sounds like you are looking to do a lease-to-buy program, where you are the bank. In that case, you can definitely offer that option to applicants, park owners do it all the time. I would just suggest having two LLCs, one that holds the land/park and one that lends money. Best of luck!

 Matt - There are specific federal laws that prohibit steering that relate to financing principal dwellings. You may NOT suggest a financing source to a prospective buyer, you may NOT quote interest rates or payments to prospective borrowers. MHI the national trade association has written about this as have many state trade associations. Rishel Consulting Group has held one day training programs for sales personnel all over the country for going on five years since the law has changed under the aegis of state trade associations and several years ago the day before the Louisville Show

While the internet and forums like this are valuable, they are limited in what can be learned, and sometimes even just plain wrong. Your comment making strong statements telling people they can steer is an example of how one person's lack of knowledge can lead another person into trouble. People ask me questions all the time outside of my area of expertise and the best and most simple answer is, "I don't know". If I know someone who I believe does know, I will make a recommendation that the party asking contact the person or company that does have the answer to the question, like a number of us do here on a regular basis.

The suggestion of two LLCs is a good answer, although I normally suggest three entities, one that retails, one that operates/owns the dirt, and one that finances. There is a long answer as to why three, that involves the SAFE Act, liability and tax benefits, but it is too long to go into on this forum.

The greater danger than not knowing, is not knowing you don't know and still being sure you're right

Hi @Ken Rishel ,

I appreciate the clarification, I even mentioned in my post that I may be missing something, which I clearly am.

Can you please explain Clayton Homes' business model to me then? A large portion of their retail selling comes from selling mobile homes to park owners, who then sell the homes to applicants, advertising all along their partnered program with 21st Century Mortgage. Are you telling me the largest mobile home manufacturer in the country is illegally pushing their financing method? 

There are federal laws that prohibit park owners from steering people towards financing? I did not realize that. How are all realtors allowed to refer home buyers to banks they have worked with in the past for financing? Is that not a similar scenario?

I agree that as a park owner, you would not be allowed to quote interest rates or payments. That is up to the bank's discretion, and I never made that claim.

As a park owner, you cannot advertise lease-to-buy programs to prospective buyers? I know several park owners and that is a big part of their business model. But by your definition, that would be steering financing, and is federally illegal. Can you please elaborate?

I am not saying you are wrong by any means, you clearly have more experience in the field than I do. I just want to understand these laws better. Can you please point me to the laws? Articles posted by MHI? The only laws I can find are from the Truth in Lending Act, which prevents steering by "loan originators" for profit or monetary gain. Code of Federal Regulations defines who a "loan originator" is and states who is exempt from this status, "An employee of a manufactured home retailer who does not take a consumer credit application, offer or negotiate credit terms available from a creditor, or advise a consumer on credit terms (including rates, fees, and other costs) available from a creditor. (1026.36)" My interpretation of that is an employee can recommend financing, just not advertise any of the credit terms (again, which I never claimed). Is there another statue I am missing?

Again, I might be missing something. Any clarification you could provide would be greatly appreciated. Thanks in advance.

Originally posted by @Rachel H.:

@William Devine If you go this route, you may need to get the licensing to do it. Check with your state. Good luck! 

Thanks - I appreciate the feedback.  I have already started the licensing paperwork and will be submitting it once the sale goes through (Don't want to jump the gun).

You need to find the book Deal on Wheels by Lonnie Scruggs. Everything you need is there. A mortgage company may not be what you need. If you are selling homes that are park owned you need to check out the seller finance laws in OUR state. My REIA has on line course that can help you. Our contact information is below.

Originally posted by @Matt Souza :

Hi @Ken Rishel,

I appreciate the clarification, I even mentioned in my post that I may be missing something, which I clearly am.

Can you please explain Clayton Homes' business model to me then? A large portion of their retail selling comes from selling mobile homes to park owners, who then sell the homes to applicants, advertising all along their partnered program with 21st Century Mortgage. Are you telling me the largest mobile home manufacturer in the country is illegally pushing their financing method? 

There are federal laws that prohibit park owners from steering people towards financing? I did not realize that. How are all realtors allowed to refer home buyers to banks they have worked with in the past for financing? Is that not a similar scenario?

I agree that as a park owner, you would not be allowed to quote interest rates or payments. That is up to the bank's discretion, and I never made that claim.

As a park owner, you cannot advertise lease-to-buy programs to prospective buyers? I know several park owners and that is a big part of their business model. But by your definition, that would be steering financing, and is federally illegal. Can you please elaborate?

I am not saying you are wrong by any means, you clearly have more experience in the field than I do. I just want to understand these laws better. Can you please point me to the laws? Articles posted by MHI? The only laws I can find are from the Truth in Lending Act, which prevents steering by "loan originators" for profit or monetary gain. Code of Federal Regulations defines who a "loan originator" is and states who is exempt from this status, "An employee of a manufactured home retailer who does not take a consumer credit application, offer or negotiate credit terms available from a creditor, or advise a consumer on credit terms (including rates, fees, and other costs) available from a creditor. (1026.36)" My interpretation of that is an employee can recommend financing, just not advertise any of the credit terms (again, which I never claimed). Is there another statue I am missing?

Again, I might be missing something. Any clarification you could provide would be greatly appreciated. Thanks in advance.

 You are missing a lot. Unfortunately, I do not have the time to address all of the issues you raised. It is too complicated. We spend a very long day on this topic through state associations and at other events before many people even begin to actually understand. Even then we do not point people to laws. I will tell you, with no disrespect intended, that most attorneys have trouble understanding all of the complications. We teach people what is and what they need to do in response to the laws. Anyone who wants more, we refer to one of five regulatory laws firms who specialize in these areas, none of whom charges less than $750.00 per hour to answer questions like yours.

Originally posted by @William Devine :

Thanks - I appreciate the feedback.  I have already started the licensing paperwork and will be submitting it once the sale goes through (Don't want to jump the gun).

 It takes most people more than a year to obtain an Illinois Mortgage Lender's License.

Originally posted by @Ken Rishel :
Originally posted by @William Devine:

Thanks - I appreciate the feedback.  I have already started the licensing paperwork and will be submitting it once the sale goes through (Don't want to jump the gun).

 It takes most people more than a year to obtain an Illinois Mortgage Lender's License.

That's disappointing but not a disaster. I will have my hands full for awhile anyway.

@William Devine why can't you do owner financing on these mobile homes? You don't need to be a mortgage company to do that anywhere. Go to - mobile home investing.net

Originally posted by @Robert Herrera :

William Devine why can't you do owner financing on these mobile homes? You don't need to be a mortgage company to do that anywhere. Go to - mobile home investing.net

 This is a prime example of dangerous crap ending up on the internet posted by people who have no idea what they do not know. It is worse if some self-styled guru is trying to get rich preaching things that are way out of date or not even close to the truth.

Originally posted by @Robert Herrera :

William Devine why can't you do owner financing on these mobile homes? You don't need to be a mortgage company to do that anywhere. Go to - mobile home investing.net

Without a mortgage license you cannot give or service mortgages. 

Originally posted by @Ken Rishel:
Originally posted by @Robert Herrera:

William Devine why can't you do owner financing on these mobile homes? You don't need to be a mortgage company to do that anywhere. Go to - mobile home investing.net

 This is a prime example of dangerous crap ending up on the internet posted by people who have no idea what they do not know. It is worse if some self-styled guru is trying to get rich preaching things that are way out of date or not even close to the truth.

 The address you listed was John Ferdo's website. I don't believe John is telling people that they can make loans anywhere without a license. There are some workaround solutions, some of which work in some states, and not in others, but even the workaround solutions are complex and still require rigorous attention to state and federal compliance issues.

Well while waiting for the mortgage licensing to come through I could use outside sources for financing. I also could leased some homes with an option to purchase at a set price after a year or two without guaranteeing they could get a mortgage.

I believe if I lease I could also offer some lease credits for the eventual down payment on the home as long as everything is disclosed to the lender.

@Ken Rishel you do not need to have a license to sell your own home on owner financing. People carry the note all the time.

I think the confusion is the mortgage company he is trying to create.

A mortgage company loans money to borrowers to make a profit, not on property they own. Meaning I find a house, get approved by a Mortgage Company, and they finance my house.

If I already own the property, why would I need a license to owner carry the property?

Originally posted by @Robert Herrera :

Ken Rishel you do not need to have a license to sell your own home on owner financing. People carry the note all the time.

I think the confusion is the mortgage company he is trying to create.

A mortgage company loans money to borrowers to make a profit, not on property they own. Meaning I find a house, get approved by a Mortgage Company, and they finance my house.

If I already own the property, why would I need a license to owner carry the property?

 Robert - With all due respect, you need to get some expert advice instead of trying to get it here. It takes time to answer these questions the way they should be answered, and experts expect to get paid to do more than they offer.

With that said, the Final Rule of the SAFE Act issued by HUD several years ago covered this. If you want to sell a home you own, and have lived in for more than a year, (definition of a personal residence) and want to seller finance the sale of that home, you neither need an MLO or a lending license. If you inherit up to three homes, you can do the same for them. (You are only allowed three homes to be financed at the same time under this exemption.)

However, if you own a home that was not inherited, or a personal residence, you must be properly licensed to finance the sale of the home yourself. In addition, in any circumstance under which you lend, licensed or otherwise, you are responsible for complying with 20+ other federal laws. A failure to do so could mean fines, penalties, lawsuits, and, in extreme circumstances, prison.

Originally posted by @William Devine :

Well while waiting for the mortgage licensing to come through I could use outside sources for financing. I also could leased some homes with an option to purchase at a set price after a year or two without guaranteeing they could get a mortgage.

I believe if I lease I could also offer some lease credits for the eventual down payment on the home as long as everything is disclosed to the lender.

 You don't want to do lease credits, et al in Illinois. That issue has been specifically addressed in Illinois and there is no way to do them legally. Since you are in Illinois, if I were you, I would talk to Performance Equity Partners as an outside lender. Triad Financial Services (Gene Dobek) could also help you out if your borrowers have good credit as could Oxford Bank & Trust in Oak Brook (Al Cole)

A list of all outside lenders making chattel loans on manufactured homes in Illinois can be found the Illinois Manufactured Housing Association website.

What i have seen done, which i think is the way to legally go, is handout a list of 5-10 lenders that you know do mobile home loans with their phone numbers. This way, you are not "steering" the buyer towards any individual lender. And, of course you would be the first one on the list?

Well said!

Of course there are a lot of other issues with starting a mortgage company. The first thing would be making sure you had the correct software to service the accounts. There are a lot of Fed guidelines and reporting that has to be done. I have to start looking around even before a license is granted.

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