What is the Difference between a Mobile Home and Real Property when getting a loan?

Mobile Home Refinance

Manufactured Home Loan

Mobile Home Mortgage

Everyday I am asked about the differences between mobile homes and real property site built homes, and how these differences affect the mortgage loan processes for these homes.

Generally speaking, a mortgage is a written agreement which gives a lender an interest in the property of a borrower to secure payment of an obligation. While this broad definition blankets all mortgage loans, the different types of homes, or collateral, are what draw differences between mobile home and manufactured home, or chattel, loans and traditional "stick built" home mortgages.

In the United States, chattel mortgages are referred to as secured transactions. Such transactions are governed in most states by Article 9 of the Uniform Commercial Code, which can be read here. When obtaining a loan for a mobile home, a borrower will be entering into a chattel mortgage. The purchaser or home owner is borrowing funds for the purchase or refinancing of movable personal property (the chattel) from the lender. The lender then secures the chattel loan with a mortgage over the chattel, or the mobile home itself. The Legal ownership of the chattel is transferred to the lender, and the registered ownership is given to the purchaser, or the homeowner, when the loan transaction has been completed.

Mortgages for traditional homes that are built on site and include real property are a bit different from chattel, or mobile home loans. A mortgage loan for this type of home is a loan secured by real property through the use of a Note, which is a document that evidences the existence of the loan. Real property mortgages can and should be additionally evidenced by a Deed of Trust document, which is recorded with the County Recorder. The Recorder is a county official that insures that instruments are recorded, giving public notice of such transactions. The Deed of Trust will be recorded with the County Recorder of the County where the real property is located.

Mobile home mortgages, or chattel loans, are not recorded or secured in the same fashion as real property loans. The title information for mobile and manufactured homes is maintained by The United States Department of Housing and Urban Development. In the State of California, The Department of Housing has "Registration and Titling" offices that are specifically assigned to maintaining the title information on Mobile and Manufactured Homes. The homeowner, or purchaser, of a mobile home shall be shown on the title as the registered owner, and the lender shall be shown as the Legal Owner to the mobile or manufactured Home. When a mobile or manufactured home is encumbered by a Legal Owner, the actual Certificate of Title to the mobile home is handed to the lender, or legal owner. The homeowner is handed a Registration Card, which evidences the homeowner´s Registered Ownership interest to the mobile home. With site-built, real property homes, the homeowner retains a Grant Deed to evidence their ownership in the home, and the lender maintains the Note and Deed of Trust to evidence their ownership interest in the real property home.

It´s helpful to understand these title and security differences, as they play a major role in determining the actual loan type, qualifying agents and the loan process itself. Mobile homes and real property site built homes are not only made differently, but titled differently and mortgaged uniquely as well. For more information on mobile and manufactured home titling, visit http://www.hud.gov/.