By Patrick Crowley
The Cincinnati Enquirer

FORT MITCHELL - Two Tristate congressmen have raised concerns about a proposal they say will make it harder for people to buy manufactured homes, a significant source of housing in Kentucky.

The nation's largest financer of home mortgages, the Washington-based Federal National Mortgage Association - known as Fannie Mae - is considering tightening lending for manufactured homes.

Democratic Reps. Ken Lucas of Kentucky and Baron Hill of Indiana are concerned the changes will make it more difficult for people to buy manufactured homes.

Changes to manufactured housing loans "would decrease the opportunity for homeownership, directly contradicting Fannie Mae's stated purpose," the congressmen wrote in a May 8 letter to Fannie Mae CEO Franklin D. Raines.

"Manufactured housing is an important and often-used means of housing for residents in our districts," Hill and Lucas said.

Fannie Mae is a private company that is not funded by the government.

But it was created by Congress in 1938 and has grown to a publicly traded company that continues to operate under a Congressional charter directing it to increase home ownership opportunities for low- and middle-income Americans.

In a May 14 letter, Raines discussed the reasoning for the changes, telling Lucas the manufactured housing industry has undergone "dramatic changes."

"Many larger manufacturers and retailers have exited the market or declared bankruptcy, largely due to high delinquencies and losses," Raines said. "These challenging industry dynamics prompted us to review our policies and guidelines secured by manufactured homes."

Fannie Mae had proposed reducing its maximum loan term for manufactured housing from 30 years to 20 years.

According to The Manufactured Housing Global Network, an industry trade group, if only 20-year loans are offered, monthly payments would increase by about $100 on the $90,000 average price of a manufactured home.

"This will take away opportunities for people to buy a home," said Nathan Smith, owner of SSK Communities in Erlanger, the largest operator of manufactured home communities in the country. He is chairman of the Kenton County Democratic Party.

After a meeting last week involving Lucas, Fannie Mae officials and representatives of the manufactured housing industry, Fannie Mae indicated it will maintain 30-year mortgages.

"We believe it is critical to protect the consumer and maintain the liquidity of this important affordable housing market," Fannie Mae spokesman Alfred King said.

"We are looking at a number of options and are in the process of finalizing a set of changes," King said. "As part of this process we have consulted with the Manufactured Housing Institute, Mortgage Bankers Association and our lender customers. Based on their feedback, we will develop a 30-year option for mortgages secured by manufactured homes."

Bruce Savage, spokesman for the Manufactured Housing Institute, said while Fannie Mae is likely to continue offering 30-year mortgages, it is considering increasing the required down payment from 5 percent to 10 percent.

"We're still concerned about the impact of 10 percent down payment on affordability and maintaining affordable housing for millions of people," Savage said Tuesday.

King stressed that no changes have been made and that the agency is "talking to interested parties and trying to get input."

Savage said Fannie Mae's decision to increase the down payment is due to the performance of loans on manufactured housing, which is information the agency will not release.

Savage said he has asked to see the data, but Fannie Mae has refused.

King also refused to discuss specifics of mortgage loan performance.

A March report from Credit Suisse First Boston found that manufactured housing mortgage loans at least 60 days delinquent rose 4.23% in February from February 2002.

According to the Department of Housing and Urban Development, in 2001 manufactured home loan lenders accounted for 16.1% of all conventional home purchase applications but 49.8% of conventional home purchase denials.

Lucas is mobilizing Congress' Manufactured Housing Caucus - which has 76 House members and 15 members in the Senate - to lobby Fannie Mae against requiring a 10% down payment.

Ohio, Kentucky and Indiana members of Congress belong to the housing caucus.

Manufactured Homes are built in a factory to specifications codes administered by HUD and the U.S. Department of Housing.

They were once known as mobile homes, but the term "manufactured housing" started after the federal guidelines were established in 1976. While at one time most such homes resembled trailers, many today are indistinguishable from homes built directly on a lot.

According to HUD there were 8.9 million manufactured housing units in the United States in 2001, making up 7.5 percent of the nation's total stock of 119 million housing units.

Kentucky is 10th in the nation in percentage of manufactured housing with 13.3%. South Carolina leads the nation at 20%. Ohio is at 4.4% and Indiana comes in at 6.2%.

Tim Doyle, spokesman for the Mortgage Bankers Association of America in Washington, said the association is concerned "with some of the policy changes being contemplated and has met with policy makers at Fannie Mae to specifically discuss the availability of a 30-year manufactured housing product."

"MBA's belief is that with prudent underwriting criteria, the 30-year loan can be offered in a manner that balances the need for this product in terms of affordability, with the additional risk it entails," Doyle said. "Fannie Mae was receptive to the idea and MBA is confident that this issue will be resolved."

E-mail pcrowley@enquirer.com