Buy Here Pay Here Mobile Home?

Question

I'm just trying to think outside the box here. Please note I have virtually no knowledge regarding mobile home sales.

From what I've read Dodd Frank has pretty much put an end to rent to own and lease to own options.

Am I correct in the fact that a mobile home is sold with a title similar to a car and not a typical deed?

I'm wondering because I am a car dealer in PA and I believe I can apply for a license to sell mobile homes as well. I know there are a ton of buy here pay here car lots where the dealer carries the financing, could the same thing be done with a mobile home as a dealer to avoid Dodd Frank?

Jason Shellaway · Answer

@Leslie A.@Marc FaulknerSorry still getting used to the name tagging thing.

John Lowe · Answer

Despite cries to the contrary, the sky is not falling. The SAFE Act and Dodd Frank do not prohibit seller financing or lease options, it merely regulates the activity. I think there are two issues that seem to concern RE investors:Restrictions in underwriting/loan terms- DF discourages abusive loan terms (neg amortizing, balloon payments, 40 year schedules, etc). DF encourages responsible underwriting practices (verification, documentation, reasonable DTI etc.). The impact on MH investors is minimal, most of us never did that kind of junk, and we've always assessed the buyers ability to pay. Even meeting DTI requirements shouldn't be a problem. Lot rent and other bills are not included in the calculation, and many folks' credit is so bad they don't have any debt (beyond their car payment) to be included in the calculation. The only modification in practice that most MH investors need to comply with DF are along the lines of documentation.Who can make loans- the SAFE Act mandated licensing. It sucks, but its just a matter of complying. Those doing multiple deals will need to get licensed or use a LMO. Its inconvenient, but ultimately not that big of a deal. In one of the states (Florida) I invest in, the MH Dealer license requirements are more onerous than the Mortgage Originator requirements.Properly constructed lease options aren't effected at all. Just make a true lease with a term of not more than 1 or 2 years and no rent credits. Create an option contract that either doesn't include financing or is a compliant mortgage.I think DF will be good for MH investors because it discourages park owners from being in the financing business. There should be more opportunity and less competition in 2015. Jason, don't be discouraged, go for it!

Jason Shellaway · Answer

@John Lowe Thanks for the response and the encouragement. You make a good point and it may not be worth the effort or saving the money on a MLO. I'm all for doing it legally so I would be hesitant to go the BHPH route if I couldn't find some definitive answers. Although, if I'm correct and I already have an installment sellers license and getting a MH Dealers License is as easy as getting a Vehicle Dealers License it still might be worth considering.

Jason Shellaway · Answer

Thank you for the response @Leslie A @Mark Faulkner There certainly are more licensing requirements since 2008. Although, from what I've been able to gather from some of the PA licensing and Banking codes I've read through, I still think it might be possible since I do have an installment sellers license. As of now I've only done 3rd party loans and never originated my own. I would have to look into that quite a bit more. I found this letter referenced on the PA Dept of Banking and Securities website. It wouldn't allow me to post a link so I'll copy the text here. Dear :This is in response to your letter to the Department of Banking (the ^Department]). Therein,on behalf of your client who remains unnamed, you request information regarding the Motor VehicleSales Finance Act, 69 P.S. D 601 et seq., (^MVSFA]).Specifically, you inquire (i) whether mobile homes which are not self-propelled constitutemotor vehicles for the purposes of the MVSFA; and (ii) whether an individual who sells mobilehomes on an installment basis is an installment seller required to be licensed under the MVSFA.According to your letter and our telephone conversation, your client purchases two or three usedmobile homes each year and then sells the mobile homes via an installment sale contract toindividual buyers. Additionally, your client retains legal title to the mobile home until theinstallment contract for the mobile home is paid in full.Definition of ^mobile homes] pursuant to the MVSFA: Section 3.21 of the MVSFA defines ^mobilehomes] as ^those vehicles defined as such in section 102 of Title 75. . .[of the] PennsylvaniaConsolidated Statutes.] 69 P.S. D 603.21. ^Mobile home] is defined in the Vehicle Code as:[a] trailer designed and used exclusively for living quarters or commercial purposes whichexceeds the maximum size limitations prescribed by this title for operation on a highway andis only incidentally operated on a highway.75 Pa.C.S. D 102. This definition in the Vehicle Code is the same definition of ^mobile home] towhich the MVSFA is applicable. Furthermore, the MVSFA governs the financing of retail purchasesof ^motor vehicles] broadly defined in section 3 of the MVSFA as:any self-propelled device . . . by which any person or property is or may betransported or drawn upon a public highway . . . but which may incidentally transfer personsor property on a public highway. . .69 P.S. D 603.1. Therefore, the broad definition of ^motor vehicle] appears to include the morenarrowly defined term ^mobile home], especially because both the definition of ^motor vehicle] inthe MVSFA, and of ^mobile home] in the Vehicle Code, encompass the ^incidental] operation ortransport of a motor vehicle, including a mobile home, on a public highway.MVSFA governs installment sales of mobile homes: The MVSFA defines an ^installment salecontract] in relevant part as ^any contract for the retail sale of a motor vehicle, or which has a similarpurpose or effect under which part or all of the price is payable in two or more scheduled payments. . .] 69 P.S. D 603.10. Accordingly, an installment sale contract for the retail sale of the mobilehome is one in which part or all of the price of the mobile home is payable in two or more scheduledpayments.An ^installment seller] is defined in part by the MVSFA as ^a person engaged in the businessof selling, hiring or leasing motor vehicles under installment sale contracts]. 69 P.S. D 603.4.Therefore, your clientZs activities meet the definition of an installment seller of mobile homes underthe MVSFA. Consequently, your client is required to be licensed by the Department.1 See 69 P.S.D 604. For your convenience, I have enclosed an application for licensure for an installment seller.The Department's analysis is based upon the facts and conditions as stated in this letter. Anychange in the facts could result in a reversal of the Department's position. This letter states theDepartment's position regarding the issues discussed herein and may not be relied upon or construedas constituting legal advice.If you have any additional questions regarding this matter, do not hesitate to contact me.

Marc Faulkner · Answer

The key distinction is that mobile homes are considered dwellings that are lived in. With that said, I am certain that there are more license and compliance requirements in the car business, than there were in 2008, especially for those offering internal financing.

Leslie A. · Answer

Hey Jason,Unfortunately, that won't work. They're still subject to the Dodd Frank act. I wish it wasn't so, but it is. That's why I do rentals.