Recent updates to the selling guides of Fannie Mae and Freddie Mac are providing lenders with more flexibility in several areas, particularly in the factory-built housing segment, which has gained attention as home affordability remains under pressure. Additionally, a significant purchase agreement involving Boxabl signals potential growth in this niche lending space.
Key Changes in GSE Selling Guides
Fannie Mae has streamlined its conventional loan process for Native American tribes that have been previously approved. Meanwhile, Freddie Mac is now purchasing mortgages that finance manufactured homes relocated from another property, provided an inspection confirms structural integrity and zoning is consistent or improved.
Boxabl's Largest Residential Deal
Boxabl, a publicly traded innovator in manufactured homes, has entered into a multiyear agreement to supply up to 1,500 homes to LC Vegas Acquisitions LLC. This marks Boxabl’s largest residential purchase agreement to date. Greg Palivos, co-founder and managing partner of LC Vegas Acquisitions, stated in a press release, “Boxabl’s manufacturing platform gives us a way to deliver attainable, high-quality housing at a pace and price point that traditional construction can’t match.”
Niche Lending Opportunities and Persistent Hurdles
Lenders exploring this niche face challenges related to economies of scale and the requirement to be real estate-secured when issuing small mortgages for lower-cost manufactured housing. Public officials have been working on policy adjustments, but at the GSEs, certain risk-management restrictions remain. For instance, Freddie Mac does not permit loan proceeds for manufactured homes moved to a new property to cover ancillary costs such as delivery, setup, anchoring on a fixed foundation, or permanent utility connections, including well and septic systems.
Despite these obstacles, lenders have increasingly been making smaller loans, such as home equity lines of credit (HELOCs), which Boxabl has encouraged in connection with its homes. Boxabl provides a link to Figure for HELOC financing, which some borrowers use to place its homes as accessory dwelling units on their existing properties.
Automation and Modernization Efforts
Both private-sector innovators like Figure and the GSEs have been leveraging advanced automation for loan processing and related tasks to offset costs. Freddie Mac is giving lenders flexibility to use written verification of employment in automated income assessments. Additionally, Freddie Mac is lifting prohibitions on using tax transcripts with automated assessments of self-employed income from sole proprietorships as reported on IRS Schedule C, in certain circumstances. This was previously disallowed when other self-employed income was recorded on other tax forms like Schedules E or F.
Tighter Rules for Some Borrowers
While the GSEs have streamlined some rules, they have also tightened others for risk management, potentially pushing more applicants into the growing private market outside traditional qualified mortgage standards. Fannie Mae has updated its selling guide to allow positive rental income to qualify only if the borrower has previously managed a property for at least 12 months, as documented on Schedule E or, in some cases, a fully executed lease over the last 12 months. Borrowers without sufficient landlord experience may still use tenant income to offset a rental property’s principal, interest, taxes, insurance, and association dues at Fannie Mae.
