Foreclosure of Manufactured, or Mobile, Homes

The process a lender needs to use when a borrower defaults on a manufactured home loan depends on what type of property the home is considered to be.

If you are one of the millions Americans who live in a manufactured (or mobile) home, you may have wondered what would happen if you fell behind on your home loan payments. That all depends on whether your home can be characterized as personal property or real property. If a court would consider your home to be real property, your state’s foreclosure procedures would apply. If, on the other hand, a court would designate your home as personal property, your lender could use self-help repossession or sue you to recover possession of the manufactured home.

Understanding the Difference Between Mobile Homes and Manufactured Homes

The terms "mobile home" and "manufactured home" are often used interchangeably. However, there is a difference between mobile and manufactured homes.

In 1974, Congress passed the Mobile Home Construction and Safety Standards Act. This Act directed the U.S. Department of Housing and Urban Development (HUD) to set federal construction standards for mobile homes. All mobile homes constructed after June 16, 1976 (the effective date of the HUD standards) must have a HUD label certifying that the home has been inspected and constructed in compliance with the Act.

Congress enacted public law 96-399 on October 8, 1980, which officially changed the name of this type of home from “mobile home” to “manufactured home.” As a result, the term “manufactured home” is typically used to describe a home that is constructed pursuant to the HUD construction and safety standards, whereas the term “mobile home” refers to homes built before June 15, 1976, when the federal standards took effect.

Is Your Home Real or Personal Property?

In almost all states, manufactured homes are initially considered personal property. Once the home is placed on land, however, the question of whether the home is personal or real property arises.

Is There a Statute Covering Manufactured Homes?

The first step in figuring out whether your manufactured home is real property or personal property is to see whether your state has a statute that governs. Your state likely falls into one of the following categories:

  • About three-quarters of all states have a statute that sets out the process that must be followed to convert a manufactured home from personal property to real property.
  • Some states have a statute that specifies whether a home is personal property or real property in a credit transaction.
  • Some states have a statute that specifies the conditions under which a manufactured home may be subject to property tax. (Although these statutes don’t apply to credit transactions, if a home is considered real property under a county’s property tax scheme, courts may use this as evidence that the home is real property for other purposes.)
  • Some states have no statute covering manufactured homes.

To learn how to research your state’s statutes, follow the tips in our article Finding Your State’s Foreclosure Laws.

How Attached is the Manufactured Home to the Land?

If there is no statute that governs the conversion of a manufactured home to real property, courts will evaluate the connection between the manufactured home to the land the home sits on. The relevant question is whether the home has been modified and attached to the land to the extent that it should be considered part of the real property. Courts will look to the following factors:

  • Have the wheels on the manufactured home been removed?
  • Has the tongue, or hitch, used for transporting the manufactured home been removed?
  • Has the home been placed on a foundation?
  • Has the home been connected to utilities, such as a septic system?
  • Have steps or a porch been attached to the manufactured home?

Also relevant is the intent of the homeowner and whether the homeowner owns both the manufactured home and the land it sits on. If the homeowner intended to connect the home to utilities (for example, the homeowner contacted the utility company and requested a start date for service) but had not yet done so, courts will still use this as evidence that the manufactured home is real property. Some courts will also use the fact that the homeowner owns both the manufactured home and the underlying land as evidence that the manufactured home is real property.

Do the Loan Documents Specify Whether the Home is Personal or Real Property?

If your state has a statute that dictates whether your home is real or personal property, simply having a clause in your manufactured home loan documents specifying otherwise won’t be sufficient. But if it’s unclear whether your home is personal or real property, a court will give weight to such a clause.

Foreclosure v. Replevin

Only by figuring out whether the manufactured home is personal property or real property can a lender and borrower know what process must be used by the lender to recover the home on the event of the borrower’s default.

Foreclosure Process Must Be Followed for Real Property

If your manufactured home is real property in the eyes of the law, your lender should have recorded its security interest in your home in your local county’s land records and, in the event of your default, your lender must use your state’s foreclosure procedures. (To learn what the foreclosure process is in your state, click the link for your state in our State Foreclosure Laws page.)

Replevin Must Be Used on Personal Property

If your manufactured home falls under the legal definition of personal property in your state, the repossession procedures set out in Article 9 of the Uniform Commercial Code (UCC) must be followed by your lender. Although the UCC allows lenders to choose between self-help repossession or replevin (a lawsuit to recover goods) to retake ownership of security in the event of a borrower’s default, self help is allowed only if there will be no breach of peace, or public disturbance. It’s unlikely that a lender would be able to take ownership of an occupied home without breaching the peace, so by default most lenders will be required to sue the borrower to recover the manufactured home. The process by which a lender can retake possession of personal property serving as security for a loan in default will be set out in your state’s statutes.

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