When financing real estate, normal financing usually consists of more or less standard self-amortizing 30-year mortgages, but when financing mobile homes on rented land, financing can take a host of forms. This is particularly true of used mobile homes.
Unlike mortages, installment sales of mobile homes are governed by the Uniform Commercial Code. In some States, the buyer holds title and the loans are represented as liens on it. In other States, the homes are sold on conditional sales contracts under the terms of which, title doesn’t pass to the buyer until the final payment has been made. In such case, the lender files a UCC-1 form with the State and in the county where the mobile home is located to put the public on notice that the unit has been liened. In some States, it’s quite normal for the Title document to be signed and held by the lender as security for the loan.
To make things even more complicated, a mobile home might be financed with one company, and the land on which it sits financed with a different company. The buyer of the land might be leasing it to another party who sub-leases it to the mobile home owner. Despite this maze of financing schemes, mobile home financing is a very lucrative business and one that typically yields about 50% more than a real estate loan.
When securing a mobile home loan for a unit on leased land, it behooves the lender to obtain an assignment of the land lease from the buyer of the mobile home. Failing to do this might place him in the same position of a lender in California who repossessed the mobile home, but was then served a notice to move it off the lot that was leased to the borrower. Needless to say, he was highly motivated to renegotiate the deal so that the mobile home could remain on the land.
From the standpoint of the person in control of the land, things can turn out quite well. A long time ago in a land far away I bought a completely fenced half-acre lot in a mobile home subdivision. Unkown to me it had a fairly nice New Moon single-wide parked on it with the usual carport and roofed patio option. It was unlocked, after poking around in assorted waste baskets I found enough information to track down the lender, a small loan company specializing in used mobile home loans. It too had failed to obtain an assignment of the land lease.
I expressed an interest in buying the loan and was informed that the current loan balance, including interest on back payments, was $5800. When I inquired what the loan payoff was, I was told it was $3400. When I explained that the unit owed back rent, the price fell to $2200. Then when I declined, and requested they find some way to pay the back rent, and to remove the unit with a crane because I didn’t want the lot disturbed or the fence taken down, the price fell to $800; which I grudgingly paid.
