Maximum LTV/Minimum DSCR:  

• Market-Rate Rental:

  • Acquisition/Conversion: 70%/1.40x

  • Seasoned Refinance: 70%/1.40x

• As Cooperative:

  • Acquisition/Conversion: N/A/1.15x

  • Seasoned Refinance: N/A/1.10x

Prepayment Options:  Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan. 

Recourse:  Most loans are non-recourse with standard “bad boy” carve-out

Eligible Borrowers:  

• Borrower must be a cooperative or association in which owning shares allows shareholders to occupy a certain pad site

• At rate lock, 100% of pads must be owned by the borrower (as a cooperative or association), and resident shareholders must own at least 90% of shares

Eligible Properties:  Existing, professionally managed MHCs (age restrictions allowed)

Transaction Types: 

• Acquisition/Conversions: These are designed for MHC properties in the process of transitioning from a rental property to a resident-owned manufactured housing community.

• Seasoned Refinance: This is a refinance on a resident-owned manufactured housing community, typically after the majority of the shares have already been sold.

Sellers/Servicers:  Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but in general, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities. 

Supplemental Financing:  Available 

Other Requirements/Information:

• Private wells/septic systems allowed in some circumstances.

• No seller financing, preferred equity, wrap financing, or mezzanine financing is allowed.

• Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.

• No RV resorts or broken condominiums allowed.

Refinancing Test:  Required for all refinancing loans 

Advantages

• Very competitive interest rates

• Loans are non-recourse

• Standard rate locks available

Disadvantages

• Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment

• Application fees required: $2,000 or 0.1% of loan amount (whichever is larger)

• Replacement reserves required ($50/pad site per year, or $250/rented manufactured home per year, if owned by the borrower and included in the loan's collateral)

Case Study: Becoming Owners in Bakersfield

In the rural town of Bakersfield, California, a group of residents living in the Grand Oaks Manufactured Housing Community (MHC) came together with an ambitious plan. They wanted to transition from being renters to owners of the MHC in which they've lived for years. However, the cost of acquisition and conversion was high, and they needed a financial solution that catered to their unique circumstances.

Their answer lay in Freddie Mac's Manufactured Housing Resident-Owned Community (MHROC) Loan. With its tailored terms, this loan seemed like the perfect fit for their needs.

The Grand Oaks MHC comprised 100 pad sites and was appraised at $2.5 million. The residents, now formed into a cooperative, chose to apply for an MHROC Loan to finance their acquisition and conversion of the MHC.

With the MHROC Loan, they qualified for a 70% LTV on an acquisition/conversion basis, which amounted to a loan of $1.75 million. The loan offered a 30-year fixed-rate term, providing the cooperative with predictable and stable repayment terms, which was crucial given the broad financial demographics of the community members.

Most importantly, the loan was non-recourse, which meant that the community members didn't have personal liability on the loan. In addition, the cooperative was also eligible for supplemental financing, providing further flexibility to the financial arrangement.

The Grand Oaks residents' dream came true. They are now proud owners of the community where they've built their lives, providing them with a sense of stability and financial control. This transition not only benefited the residents but also helped promote affordable housing ownership in the rural areas of California.

This loan program made a tangible impact in the lives of the Grand Oaks residents, and the residents were thankful for the opportunity that the MHROC loan provided.

This is a fictional case study provided for illustrative purposes.

In this article:

1. Freddie Mac Financing for Resident-Owned Manufactured Housing Communities
2. Sample Freddie Mac Terms for Manufactured Housing Resident-Owned Community Loans in 2024
3. Advantages
4. Disadvantages
5. Case Study: Becoming Owners in Bakersfield
6. Get Financing