Non-bank lenders refusing to write mortgages on mobile homes are handing the growing niche market to the big banks, but also limiting market share for brokers, said one Halifax professional.
“Currently only about five per cent of our mortgages are in mini-homes,” James Shinners, president of Mortgage Managers, an independent brokerage focused on the burgeoning Halifax Regional Municipality, told MortgageBrokerNews.ca. “With really only the banks offering mortgages, that five per cent is found business instead of business that we can market to.”
Broker efforts to grow that business have been hamstrung by the dearth of non-bank lenders willing to provide mortgages for mobile homes. Almost all underwriting is now performed by the Big Five, with prospective borrowers bypassing the broker channel and dealing directly with bank reps.
The direct route means mortgage professionals like Shinners are increasingly cut out of a good and growing thing. There are more than 14 trailer parks in his Halifax market, alone.
According to Statistics Canada, no fewer than 380,000 people in this country call a mini-home – aka mobile or modular home, trailer or double-wide – their primary residence. There are no fewer than 250,000 units in Canada.
With a starting price of $80,000 for a 680 sq. ft. trailer, those moveable residences are billed as a cost-effective alternative for families seeking homeownership, but without the income required for bricks-and-mortar construction.
Most of the homes sit on rented land in one of 500-plus trailer parks across the country, with a growing number of them freehold – i.e., sitting on land the trailer’s owner also owns. That makes it possible for a borrower to win discounted mortgage rates, said Shinners.
But the overwhelming majority of mobile homes sit on rented land, with owners only able to access a bank’s posted rates, regardless of their beacon score. Non-bank lenders have the power to lower those rates and grow the broker pipeline in the process, argues Shinners.
While MCAP Service Corporation provides mortgages on mobile homes, they must be freehold, have permanent foundations and are subject to “a satisfactory full appraisal,” said company president Ron Swift. The lender is largely the exception, with other non-banks pointing to greater flight risks, inadequate security and depreciation concerns as reasons for steering clear of the business.
“I’m not sure why the non-banks aren’t in there,” said Shinners, pointing the number of upscale trailer parts in the greater Halifax area. “If we had more lenders, more brokers might take up mobile homes as a niche, and with the cost of traditional homes outstripping income growth, demand for mini-homes is likely to grow.”
MCAP, at least, appears open to having a discussion.
“We have not been asked by our customers to relook at our current mobile home policies and therefore have no current plans to review,” Swift told MortgageBrokerNews.ca.