Mobile Home notes are popular because there are a vast number of them in this industry. There are a large number of MH parks in this country, and many people are placing mobile homes on land. There’s a variety of people in this group ranging from those just starting out to retirees looking toward a simpler life, and many others. This is a growing business in most parts of the country.
There are 2 basic types of paper for mobile homes. The first is mobile home without land (not preferred) and the second is mobile home with land (preferred).
Many factors go into the pricing of mobile home notes. The following are some of the more important ones, in no particular order:
These factors should be considered if you sell a mobile home and carry the mortgage. If you should have a need to sell your note in the future, the factors above will affect the price you receive. Be careful when accepting too many compromises when selling your MH if you think there is a chance of liquidating the note in the future. Some things including the face value, down payment, and LTV will not be as important a factor as time goes by and the note stays current. The others will always affect your note pricing in the future. Getting someone with a good credit rating is not only good for note sales; it is also smart for you in the collection of your note.
This is the stronger of the 2 types of MH notes. Having land to back this type of note makes this more secure for an investor. It would not be as likely for someone to abandon the land and home, or for them to take the MH off the land and move it to an undisclosed location for the purpose of avoiding repossession. Mobile homes with land and a permanent foundation allow better pricing than MH’s without land or a permanent foundation, because the title is deeded as a home and not a vehicle. This makes the home more valuable and the note reflects this. This would not be the case for a mobile home placed on land without a permanent foundation. This note would be less valuable since risk sets the price for the paper industry. Some institutional buyers will consider buying with land paper, and this is better for the seller. Institutional buyers will take lower yields than a private investor since they deal with volume and can accept more risk. A private investor is normally going to want to make a higher yield, wouldn’t you?
This is the weaker of the two types of MH notes, and we cannot buy these notes in most cases. There are very few investors for this note type and the discounts on this type of note are steep. This is due to the security involved in this paper. Taking a partial is usually the best move for you. A MH w/o land is only securitized by the mobile home itself. These mobile homes do not have land and are almost always located in a MH park. The park’s location and condition affect the price of the note. There is more risk with this paper because the payee could move the home out of the park or junk the home. This will leave the investor without security to collect on the debt.
Another reason for the risk with this note is that mobile homes are titled like vehicles and in fact they depreciate in value like vehicles do. This makes the Loan to Value ratio very important in the pricing of your mobile home note.