Why the New Rule on Ability to Repay Can Help the Manufactured Housing Industry

[Donna Rishel]

The Ability to Repay Rule issued by the CFPB caps the maximum ratio at 43%.

Given that in most parts of the country it costs $75-$85 per square foot to build a site built SFR (sans land) a 1,200 square foot home will cost $90,000 to $102,000 (sans land) How many 16x80s cost anywhere near that amount?

If you accept (will vary by area) that the average family income is $3,500 per month, then the total debt - including the home payments - cannot exceed $1,500 per month. If the home costs $100,000 (sans land) and the borrower puts up 10% leaving $90,000 to finance there is already a problem for stick built. On 30 years at 4% the payment (sans land) is $429.67 meaning that the rest of monthly debt cannot exceed $1,000 per month without accounting for land.

If a manufactured home goes into a community with a lot rent of $275 and sells for $35,000 the total monthly obligation will be around $555 including the land assuming $5,000 down and a 20 year amortization and an APR of 10%, That does reduce the permissible outside monthly debt to a little under $1,000 a month but it also accounts for the land.

Obviously all of these figures will need adjusting for the area of the country and for the goals of the community owner but the idea is clear.

Thoughts? Disagreements?