Taking the “Mobile” out of Mobile Homes
“Manufactured” or “Mobile” homes continue to be a thorn in the side of the real estate industry. While there is certainly not enough room in this space for me to navigate you through all of the perils of curing titles to mobile homes affixed to real estate, I hope that I can at least steer you in the right direction.
When a mobile home is fabricated at an “off-site” facility and transported to a mobile home dealership, the home is delivered with a Manufacturer’s Statement of Origin (“MSO”). This is the first “title” to the home, and the home is deemed to be personal property. When the home is sold, the dealer endorses the MSO over to the purchaser who can either surrender the MSO to the State, or have the State register the home and issue a Certificate of Title (“COT”). The home is then transported to a piece of real estate and permanently affixed thereto. However, the mere act of permanently affixing the home to the land (including the recording of an Affidavit in the land records memorializing same), does not, in and of itself, void the MSO or COT and convert the home to real estate. Instead, the MSO or COT must be surrendered to the State DMV for “cancellation”/”De-Titling”. Thus, whether a mobile home is permanently affixed to real estate is just one part of the analysis. The ultimate goal is to ensure that the mobile home title records are purged. So how do we get there?
When our firm receives a mobile home curative referral, we must perform a search of the “DMV” records to determine if the home was ever titled with the State. The results of this search determine the appropriate course of curative. For example, often, the DMV search shows that the mobile home is still titled in the name of a prior owner in the chain of title to the land. When faced with these facts, one curative option is to attempt to locate the prior owner, and have the owner execute applicable State specific mobile home documents. If successful, our client can then apply for a new mobile home title in its name, and then surrender same to the State. But what happens if the prior owner is deceased or is currently in Bankruptcy?
Ultimately, by De-Titling the mobile home and eliminating its “personal property” records, the home and land can be sold and conveyed together via deed like any other “stick-built” home. Further, DeTitling greatly reduces the risk and exposure to mortgage lenders (and the title insurance companies insuring same), from losses due to outstanding ownership and security interests on the mobile home COT. Accordingly, mortgage lenders should always require evidence of De-Title prior to the origination of a new mobile home loan.
Each mobile home affixed to real estate presents a unique set of facts and issues. In the States in which our firm practices (AL, GA, MS & TN), in almost all cases, mobile home curative is performed postforeclosure. However the curative itself is often a very lengthy and time-consuming process. Accordingly, lenders and servicers should keep this in mind when conveying a mobile home property to Fannie Mae, Freddie Mac or the Secretary of HUD, all of which require evidence of De-Title as a condition of conveyance.
Despite the challenges that mobile homes present, the mere fact that a property acquired through foreclosure is improved with a mobile home, should not deter mortgagees and servicers from pursuing FHA/HUD claims. While certain circumstances dictate the bypassing of a HUD claim and liquidation of the property at REO, curative measures are available to combat even the most severe set of mobile home issues. Our firm welcomes the challenge and looks forward to continuing to assist our clients with their mobile home inventory.