Introduction
Loaning on a land parcel with a manufactured home isn’t your everyday transaction. It’s a unique scenario—like a house with a llama in the backyard—that invites a deeper examination of the complexities between real and personal property. This article examines the intricacies of lending on such properties, emphasizing the significance of proper certification, legal nuances, and the roles of key players in the transaction.
1. Understanding the Loan Request
A borrower seeks financing to purchase a ¼-acre parcel with a manufactured home affixed to a permanent foundation. The property is non-owner-occupied and intended for rental. The appeal lies in its suitability for gardening, animal keeping, and a lifestyle perceived as “off the grid.” The potential renter owns a llama named Dolly, along with goats and chickens—adding charm and character to the transaction.
2. Real Property vs. Personal Property
3. Fee Simple Ownership
The borrower owns both the land and the manufactured home in fee simple. This implies full ownership rights and responsibility for obtaining proper certification that the house is permanently affixed, thereby transforming it into a real property asset.
4. The Risk of Mobility
Despite being affixed to a foundation, a manufactured home can be unbolted, its wheels installed, and it can be hauled away. In one case, a borrower defaulted and removed the home, leaving only the land parcel. This underscores the importance of treating such loans as land parcel loans unless proper certification is obtained.
5. Legal Framework for Encumbrance
6. Encumbering Real Property
Lenders encumber real property by recording a deed of trust or mortgage in county records.
7. Encumbering Personal Property
If the manufactured home lacks proper certification, it remains personal property. Lenders must file a UCC-1 Financing Statement with the Secretary of State to secure an interest in the property.
8. UCC-1 Filing Includes:
- Loan proceeds held by fund control
- Building materials have not yet been installed
- Working drawings and third-party reports
- Entitlement approvals and permits
The UCC-1 remains public record until a UCC-3 is filed to reflect debt satisfaction.
9. Key Certification: California’s 433a
In California, a manufactured home remains personal property until the owner obtains a 433a Permanent Foundation Certification. This certification ensures compliance with:
California Code of Regulations, Title 25, Chapter 2, Section 18551
10. Steps to Certification:
- Apply to the local building department
- Undergo inspection of the foundation
- Receive municipal approval
- Record certification in the county records
Once recorded, the home is considered real property and will appear in future title searches.
11. Title Insurance and ALTA 7 Endorsement
Upon completion of the loan or property transfer, a title company issues an ALTA 7 Endorsement. This confirms the reassignment of the manufactured home from personal to real property. It’s a critical step that secures the loan and ensures proper title transfer.
12. The Role of the Mortgage Broker
The mortgage broker acts as a fiduciary and facilitator, guiding the borrower through:
- Finding the right lender
- Negotiating terms
- Ensuring documentation is complete
Their role provides reassurance and helps align all parties, protecting the borrower’s interests throughout the process.
13. Due Diligence Questions for Lenders
Before approving the loan, lenders should ask:
- Is the land owned in fee simple or leased?
- Is the manufactured home certified as real property?
- Are utilities (water, electricity, sewage) available?
- Is the property part of a community association with CC&Rs?
- Are gardening and animal keeping permitted by local ordinances?
- What are the home’s specifications (size, age, amenities)?
- Was the installation engineered and permitted?
Conclusion
Lending on manufactured homes requires caution and thorough due diligence. Without proper certification, the house remains personal property—movable and unsecured. Understanding the legal distinctions, certification requirements, and title endorsements is essential to protect the lender’s interest and ensure a successful transaction.
In the end, Dolly Llama finds a new home, and the borrower secures a well-structured loan—thanks to a meticulous process that transforms complexity into confidence.
Feature |
Real Property |
Personal Property |
|---|---|---|
Ownership |
Fee simple with land |
May be separate from land |
Mobility |
Fixed |
Can be moved |
Encumbrance |
Deed of Trust |
UCC-1 Filing |
Certification |
433a Required |
Not applicable |
Title Insurance |
ALTA 7 Endorsement |
None |
14. Loan Process Flowchart
A step-by-step visual showing the loan process for manufactured homes:
- Loan Application
- Property Evaluation
- Certification Check (433a)
- Title Search
- UCC-1 or Deed of Trust Filing
- ALTA 7 Endorsement
- Loan Closing
15. Dolly Llama Case Study Illustration
A lighthearted sketch or cartoon showing:
- Dolly the llama in the backyard
- Manufactured home on a foundation
- Happy renter family
- Broker and lender shaking hands
15. 433a Certification Process
A visual timeline or checklist:
- Submit Application
- Engineering Review
- Municipal Inspection
- Approval Granted
- Record Certification
16. Title Insurance Layers
- Base Title Policy
- ALTA Endorsement
- ALTA 7 for Manufactured Homes
- Final Title Transfer