Freddie Mac Manufactured Housing Resident Owned Community Loans (MHROCs)
Freddie Mac's Manufactured Housing Resident-Owned Community (MHROC) Loan provides flexible 5- to 30-year fixed-rate, non-recourse loan terms.
Freddie Mac Financing for Resident-Owned Manufactured Housing Communities
For many Americans living outside urban areas, manufactured housing communities (MHCs) may be the only source of affordable housing within reach. While affordable MHCs are a great way to increase the supply for low-cost housing on the market, it's even better when residents can own a part of the property itself.
To encourage that, Freddie Mac's Manufactured Housing Resident-Owned Community (MHROC) Loan provides flexible 5- to 30-year fixed-rate loan terms with amortizations of up to 30 years and LTV allowances of up to 70%. Plus, MHROC Loans are non-recourse, allow for both acquisitions/conversions and seasoned refinances, and permit supplemental financing, making them adaptable enough to meet the needs of many kinds of resident-owned manufactured housing communities.
To learn more, check out Freddie Mac’s official Manufactured Housing Resident Owned Community Loan (MHROC) Product Sheet or keep reading below for an in-depth explanation of the Freddie Mac Manufactured Housing Resident Owned Community Loan (MHROC) program.
Sample Freddie Mac Terms for Manufactured Housing Resident-Owned Community Loans in 2024
Minimum UBP Amount: $500,000
Terms: 5- to 30-year terms, fixed-rate loans only
Amortization: Up to 30 years
Market-Rate Rental:
Acquisition/Conversion: 70%/1.40x
Seasoned Refinance: 70%/1.40x
As Cooperative:
Acquisition/Conversion: N/A/1.15x
Seasoned Refinance: N/A/1.10x
Borrower must be a cooperative or association in which owning shares allows shareholders to occupy a certain pad site
At rate lock, 100% of pads must be owned by the borrower (as a cooperative or association), and resident shareholders must own at least 90% of shares
Acquisition/Conversions: These are designed for MHC properties in the process of transitioning from a rental property to a resident-owned manufactured housing community.
Seasoned Refinance: This is a refinance on a resident-owned manufactured housing community, typically after the majority of the shares have already been sold.
Private wells/septic systems allowed in some circumstances.
No seller financing, preferred equity, wrap financing, or mezzanine financing is allowed.
Leases must not have the option to purchase either the pad site or a borrower owned manufactured home.
No RV resorts or broken condominiums allowed.
Very competitive interest rates
Loans are non-recourse
Standard rate locks available
Typically requires third-party reports, including Appraisal, Phase I Environmental Assessment, and Physical Condition Assessment
Application fees required: $2,000 or 0.1% of loan amount (whichever is larger)
Replacement reserves required ($50/pad site per year, or $250/rented manufactured home per year, if owned by the borrower and included in the loan's collateral)
Prepayment Options: Yield maintenance until securitization, 2-year lock-out period following securitization, defeasance allowed after securitization. Yield maintenance for securitized loans is permitted for an additional fee. No pre-payment premiums required in the last 90 days of the loan.
Recourse: Most loans are non-recourse with standard “bad boy” carve-out
Eligible Borrowers:
Eligible Properties: Existing, professionally managed MHCs (age restrictions allowed)
Transaction Types:
Sellers/Servicers: Freddie Mac Multifamily Approved Seller/Servicers can originate/service these loans, but in general, Freddie Mac prefers seller/servicers with specific experience financing manufactured housing communities.
Supplemental Financing: Available
Other Requirements/Information:
Refinancing Test: Required for all refinancing loans
Advantages
Disadvantages
Case Study: Becoming Owners in Bakersfield
In the rural town of Bakersfield, California, a group of residents living in the Grand Oaks Manufactured Housing Community (MHC) came together with an ambitious plan. They wanted to transition from being renters to owners of the MHC in which they've lived for years. However, the cost of acquisition and conversion was high, and they needed a financial solution that catered to their unique circumstances.
Their answer lay in Freddie Mac's Manufactured Housing Resident-Owned Community (MHROC) Loan. With its tailored terms, this loan seemed like the perfect fit for their needs.
The Grand Oaks MHC comprised 100 pad sites and was appraised at $2.5 million. The residents, now formed into a cooperative, chose to apply for an MHROC Loan to finance their acquisition and conversion of the MHC.
With the MHROC Loan, they qualified for a 70% LTV on an acquisition/conversion basis, which amounted to a loan of $1.75 million. The loan offered a 30-year fixed-rate term, providing the cooperative with predictable and stable repayment terms, which was crucial given the broad financial demographics of the community members.
Most importantly, the loan was non-recourse, which meant that the community members didn't have personal liability on the loan. In addition, the cooperative was also eligible for supplemental financing, providing further flexibility to the financial arrangement.
The Grand Oaks residents' dream came true. They are now proud owners of the community where they've built their lives, providing them with a sense of stability and financial control. This transition not only benefited the residents but also helped promote affordable housing ownership in the rural areas of California.
This loan program made a tangible impact in the lives of the Grand Oaks residents, and the residents were thankful for the opportunity that the MHROC loan provided.
This is a fictional case study provided for illustrative purposes.