On January 3, 2025, the U.S. Department of Agriculture (“USDA”) published a Final Rule implementing changes for the Single Family Housing Direct Loan Program and the Single Family Housing Guaranteed Loan Program. The Final Rule makes three notable changes: allows for financing of the purchase of existing manufactured homes, revises ownership requirements for new energy-efficient manufactured and modular homes in a land-lease community operating on a nonprofit bases, or on Tribal Trust land to allow the USDA to accept a lease with an unexpired term that is at least two years longer than the loan term , and changes the definition of a “New dwelling” for a manufactured home.
Under the new provisions, the USDA will permit the purchase of existing manufactured homes that are newer and meet updated construction and safety standards. Units must have been constructed in conformance with Federal Manufactured Home Construction and Safety Standards (“FMHCSS”) as evidenced by both an affixed HUD Certification label and HUD Date Plate on or after a date determined by the USDA, considering factors such as industry standards and practices. Also, the manufactured home cannot have been previously installed on a different homesite or had any alterations since construction in the factory, except for porches, decks, or other structures which were built to engineered designs or were approved and inspected by local code officials.
Another important change to align with the increased emphasis on energy efficiency in the homes being financed affects the Direct program. For new energy efficient manufactured and modular home financing in land-lease communities operating on a nonprofit basis, and on Tribal Trust land, individual (allotted) Trust land, or Tribal restricted fee land, the USDA will now accept a lease with an unexpired term that is at least 2 years longer than the loan term, rather than requiring the lease unexpired term be at least 150% of the loan term.
Under 7 C.F.R. § 3555.10, the definition of “New dwelling” has been revised to include, “a manufactured home is considered a new unit if the manufacturer’s date is within 12 months from the date of the loan closing and the unit has never been occupied or installed at any other location as otherwise provided by Rural Development.” Previously a new dwelling had to be manufactured within 12 months from the date of the purchase contract, rather than loan closing. This change will provide a bit more time to obtain financing while still counting as a “new dwelling.”
Manufactured homes can offer significant cost savings compared to traditional site-built homes, and have historically been a more affordable housing option, both in terms of initial purchase price and long-term maintenance. The Final Rule states that by expanding the types of manufactured homes eligible for USDA financing, the intention is to give borrowers increased purchase options within a competitive market and increase adequate housing in rural areas.
The effective date of the Final Rule is March 4, 2025. As part of the implementation, revisions are being made to several Chapters of Handbook 1-3555. Advanced copies of the revised chapters will be available at least 30 days prior to the effective date on the USDA’s LINC Training and Resource Library webpage.
