21st Mortgage Corporation: BiggerPockets Review

By Mindy Jensen

May 26, 2020

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21st Mortgage Corporation was first incorporated in 1995 in Knoxville, Tennessee. After a 2003 acquisition, the company became a subsidiary of Clayton Homes. In the years since, 21st Mortgage has become the country’s largest lender for manufactured homes.

With a sole focus on mobile and manufactured home lending, 21st Mortgage owns the majority of the mortgages it originates, rather than package and sell them out to investors and other banks. They have originated more than 180,000 mortgages on prefabricated homes, and 21st owns and services a $9 billion portfolio.

21st Mortgage has a large footprint across the nation, with a presence in 46 states. They work closely with hundreds of manufactured home retailers, including Clayton Homes. 21st also offers mortgages on repossessed manufactured homes, at discounts to comparable new market values.

Quick facts

Minimum loan amount is $21,980 for person-to-person lending and $13,737 if property is purchased through a retailer
Borrowers’ debt-to-income ratios must be under 43 percent to qualify for a 21st Mortgage loan without having a co-signer or additional documentation. No PMI is required on manufactured home loans through 21st Mortgage.
21st Mortgage has been the largest employer of University of Tennessee graduates for the past 15 years.
Parent company Clayton Homes is owned by Berkshire Hathaway, run by investing icon (and world’s fourth richest person) Warren Buffett. Clayton commands 50 percent market share of the nations’ manufactured home industry.
Loans are not available in Alaska, Hawaii, Massachusetts, New Jersey, and Rhode Island.

INTEREST RATES
21st Mortgage’s Interest rates are high—between six and 12 percent, almost double the national average. Some of this simply because manufactured homes depreciate depreciation. Some is because their median borrower has lower income levels and credit scores.

PROS

“Innovative loan programs” allow buyers to borrow using cash, trade, or land equity.
One of few lenders to finance used mobile (or manufactured) homes, which depreciate much faster than foundational homes.
No prepayment penalties.
Closing costs and fees can be financed—and “zero money down” loan products are available for primary residences.
No minimum credit scores required in most states.

CONS

Zero-down mortgage products come with very high interest rates and are highly dependent on credit.
Interest rates on mortgages are much higher than the national averages, regardless of credit. Borrowers with low credit scores can end up paying 35 percent down (cash, credit, or trade) on a home.
All investment property purchases require at least 20 percent down payment.
Property not on a paved road may require a larger down payment or lower loan-to-value ratio. Properties with a shared well may not be financed unless the wall is located on property that is pledged as collateral.

Loan products

21st Mortgage offers innovative fixed-rate loan products for manufactured homes. No land is required; 21st can finance manufactured homes in a park or community on rented land, for both permanent and non-permanent home foundations. No private mortgage insurance (PMI) is required, either.

Financing options are available for both and new pre-owned mobile homes—usually, the pre-owned options are repossessions from Clayton Homes inventory. Purchase prices for pre-owned properties are between 25 and 40 percent below comparable average retail values of new manufactured homes.

A borrowers’ loan-to-value ratio is calculated by dividing the sum of home, land, and land improvements minus the down payment, trade-in allowances, and other credits.

Loan terms can stretch up to 23 years, but most mortgages are 10 years or less. Refinancings are available, per LTV restrictions, but don’t make up a large portion of 21st Mortgage’s business. Consolidation or cash-out refinances require a credit score of at least 600, and are not available in Texas.

21st Mortgage also offers insurance for homes, autos, boats, and commercial property. They also offer personal liability insurance. All plans are issued via an independent structured company, 21st Insurance Agency.

Mobile home loans are similar to car loans, in that they’re marked as personal property, not real estate. This is especially true if the home isn’t permanently affixed to water, sewer, or electric. If the manufactured home owner also owns the land on which the home sits, the land is often valued separately, with its own title or deed.

Interest rates can reach 13.5 percent—or more—and buyer should know that manufactured homes may lose 30 percent or more of their value in three years.

High interest rates and swift depreciation make it hard for mobile or manufactured home owners to gain equity on property that can be used to purchase a traditional home in the future.

21st Mortgage Corporation and real estate investors

For rental investors seeking the cash flow and lower capital requirements of mobile home and manufactured home properties, 21st Mortgage is an immense player in the market. Their close relationship with Clayton gives access to Clayton’s retail presence, and offers lower-priced properties through the resale of previously foreclosed homes.

For first-time home seekers that are ok with trading the downsides of manufactured homes and mobile homes for the affordability, 21st Mortgage offers a path to home ownership for a demographic historically underserved by traditional home lenders.

21st Insurance Agency offers comprehensive manufactured home insurance that covers personal property and adjacent structures on the same lot. The coverage umbrella on manufactured homeowner’s policies also includes damage from flood, fire, water, tornado, landslide, and earthquakes.

The home loan process

21st Mortgage is rare among mortgage lenders in that they originate, underwrite, and service their own portfolio of loans—so they’re motivated to see their loans perform. (Most lenders sell the bulk of their originated mortgages to agencies to remove them from the balance sheet.) The company maintains an active customer support presence and offers numerous payment options for homebuyers facing difficulty with monthly commitments.

Mortgage loans can be applied for and completed online. As part of the application process, the prospective buyer can indicate whether they seek to pay the down payment in cash, trade-in of another manufactured/mobile home, or land equity.

There are no minimum credit scores, but scores under 570 will require a 35 percent down payment in cash, trade-in, or land equity. If the prospective buyer owns the land lot the home will reside on, one combined mortgage product can roll up the land and the prefabricated home.

Most mobile or manufactured home owners lease or rent the land the home is situated on. The national monthly average to rent a space in a trailer park is around $250 per month and can reach $600 per month in some areas.

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