August 20, 2019
Freddie Mac Multifamily recently enhanced our Manufactured Housing Community (MHC) offering to encourage voluntary implementation of eight key tenant protections. These protections were recently defined by the Federal Housing Finance Agency (FHFA) as part of its Duty to Serve regulation.
Freddie Mac conducted a national analysis to better understand how these tenant protections have been implemented and found that they vary greatly by state. In the absence of a consistent state-law framework for MHC tenant protections, Freddie Mac has adjusted its MHC offering to encourage the implementation of FHFA’s tenant protections (the MHC Tenant Protections).
Although manufactured housing serves as a reliable source of affordable housing for low-income households across the country, the hybrid rental/ownership structure presented by MHCs can create potential risk for tenants. The MHC Tenant Protections were created to reduce risks by providing certainty around lease terms and safeguarding a homeowner’s right to realize a return on their most valuable investment – their home. The protections aim to build stronger communities, benefiting tenants and owners alike.
Borrowers investing in these communities may receive benefits such as discounted pricing and third-party report rebates when they agree to include MHC Tenant Protections in homeowners’ leases, within 12 months of loan origination.
Tenants are protected with:
As of late July, Freddie Mac has funded two MHC deals with these eight tenant protections, supporting communities in Florida and Illinois.
Woodland Estates, located in Ruskin, Florida, is a 60-pad, age-restricted (55+) MHC community with 55 homeowners as of April 2019. Charles Ellis, the MHC operator, recently secured $2.55 million in Freddie Mac financing from Berkadia Commercial Mortgage through a 10-year loan. Ellis is the first operator to offer these tenant protections in Florida and he thinks the offering has promise.
“Including these protections in the lease is an easy, clear way to communicate the benefits to the homeowner. It also helps save money that I can then reinvest into the community,” Ellis noted. “It’s a great product and I’m interested in doing more deals.”
That feeling is echoed by Art Tuverson of Berkadia, who worked with Freddie Mac on behalf of Mr. Ellis. “It’s a great feeling to work with Freddie Mac to implement programs that benefit the lives of the residents in our MH Communities,” he said.
Diamond Lake Village is a 62-pad MHC located in Mundelein, Illinois with 55 homeowners as of April 2019. The MHC operator recently received $3.29 million in financing from PNC Bank through a 10-year Freddie Mac loan.
“The expanded MHC offering with tenant protections serves one of the last non-subsidized housing markets left where homes are affordable and accessible to a wide range of people. And it helps us [operators] preserve capital, so we can put more money into the property while still turning a profit – it’s a win/win”, said the operator.
Freddie Mac’s expanded MHC offering provides owners with quality, long-term debt and frees up capital that can be to put back into the community. Ryan Welsh of PNC said, “The incentives offered by Freddie Mac to formally incorporate the tenant protections into the resident lease was an easy decision for the borrower and will benefit the residents for many years to come.”
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