Although the main focus of the foreclosure crisis has been on residential homes and, increasingly, on commercial property, there is a large segment of the market that is covered by manufactured homes. Close to eighteen million people live in manufactured homes. The target market for many of these properties are people with low income who are otherwise unable to afford a single family house.
When these homeowners default on the home, there are a number of differences between the process of foreclosure used on a residential property and the process used to take back a manufactured home. State law may affect the creditor's rights to a far greater extent, depending on what type of property the home is considered, where it is located, and what ownership rights the owners have on the land.
For instance, in many cases, individuals that own a manufactured home end up with two creditors if they borrow money to purchase the home. They will be paying the loan for the manufactured home, as well as on a lease or rental agreement for the land that is being used. Depending on if the owners default on the land agreement, or the home loan, different rights can apply.
Manufactured homes may be treated as personal property when they are purchased. Ownership is transferred through a certificate of title as if a car or other automobile was being sold. Creditors, in the case of a default, would be able to repossess the property, but would not have to go through a formal foreclosure procedure according to state foreclosure laws.
Other states, however, consider manufactured homes real property, and ownership is transferred through a deed recorded with the county recorder or clerk's office. If the homeowners default on their loan, the creditor would have to go through the foreclosure process according to the laws of the state, either by filing a lawsuit (judicial) or providing the property public notices (nonjudicial).
To complicate matters further, though, state laws treat manufactured homes very differently in some circumstances. Many state statutes allow for the conversion of a manufactured home from personal property to real property. And how the home is treated may be different in terms of the credit transaction. Manufactured homes, even if treated as personal property, are usually taxed in similar ways as real estate by local authorities.
Courts also play a role in determining whether property is real or personal when it comes to manufactured homes, especially if there is a question of foreclosure or repossession. This usually revolves around the issue of fixtures -- is the home so attached to the surrounding property that that it has to be considered a part of the real estate? If so, it will most likely be considered real property for the issue of default.
A big factor when it comes to the default on a loan of a manufactured home is whether it is treated as real property by any other type of state statute. For instance, if the home is sold under a certificate of title (personal property), but is taxed by the local government as real estate, courts will be more likely to consider it real property because of how it has been treated by other state actions. How the home was transferred in the past will be taken into account, but how it is currently treated may be more important.
The most important reason to determine if a manufactured home is real or personal is due to how the collection process will proceed in the event of default. The federal Uniform Commercial Code will generally be followed if it is treated as personal property, while state foreclosure laws will be used in the case of real estate. Homeowners may have an easier time defending the home depending on the applicable law.
Future articles will go into more depth as to the differences among states in how they treat manufactured homes, as well as how conversions are treated in different areas. Despite the large number of people living in these types of residences, the information on foreclosure or repossession of manufactured homes seems to be sorely lacking. But these homeowners need to be aware of the issues affecting their houses in the event they face a financial hardship and default.
Author Resource:-
Nick publishes articles on the ForeclosureFish website to provide foreclosure help and information to homeowners in need of assistance. The site describes various ways to save a home, including deed in lieu of foreclosure, filing bankruptcy, short sales, fighting foreclosure in court, and more. Visit the site for an e-book explaining the basics of foreclosure and how to stop the process: http://www.foreclosurefish.com/
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