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Outdated mobile homes that were built before the implementation of modern construction and safety standards in the 1970s can still be found across the country. Seniors living on fixed incomes often own these homes and don\u2019t have a practical solution for replacing them.<\/p>\n

That\u2019s where Bill Smith comes in. For the past decade, Smith \u2014 a Southern California-based loan officer with Reverse Mortgage West<\/strong> \u2014 has worked with a handful of homeowners to replace their outdated properties through the creative deployment of a reverse mortgage<\/a>.<\/p>\n

Smith has been a reverse LO since 2002, when Financial Freedom<\/strong><\/a> \u201cwas the giant in the industry,\u201d he said in an interview with HousingWire<\/strong>\u2019s Reverse Mortgage Daily.<\/p>\n

A few years into the job, he faced a dilemma when one of his client\u2019s applications stalled due to an obscure regulation. The underwriter told Smith that the Federal Housing Administration<\/strong> (FHA<\/a>) didn\u2019t approve loans for manufactured homes<\/a> in condominium communities, even though both types of properties are eligible for financing.<\/p>\n

\u201cIt didn\u2019t make any sense to me,\u201d Smith said.<\/p>\n

Not long after, Smith was at an industry conference and had the opportunity to speak with Margaret Burns<\/a>, who was serving at the time in a key policy role at the U.S. Department of Housing and Urban Development <\/strong>(HUD<\/a>). He explained the situation, asked Burns if the rule could be changed, and she agreed.<\/p>\n

According to Smith, the regulatory change took two years to implement. In October 2008, he received an email from Burns stating that his bill was on the desk of President George W. Bush and ready to be signed.<\/p>\n

\u201cSo, naturally, I took for credit for it in this market and in my work,\u201d Smith said. \u201cI met every dealer, I met every manufacturer, I met every manufactured park owner. Taking credit for that kind of launched me into that space \u2014 the manufacturer-owned (housing) space \u2014 and I did a lot of loans.<\/p>\n

\u201cAnd then I realized that a lot of times, if it was a pre-HUD [Code] home, June 1976 or earlier<\/a>, (borrowers) still weren\u2019t eligible.\u201d<\/p>\n

Research<\/a> published earlier this year by the Urban Institute <\/strong>noted that while it\u2019s \u201cuncertain\u201d how many pre-1976 mobile homes remain in use in America, a conservative estimate is about 1.2 million. Fifteen states had at least 20,000 of these homes, led by California (176,000), Florida (145,000) and Texas (76,000).<\/p>\n

The Manufactured Housing Institute<\/strong> (MHI) reports that there are more than 43,000 manufactured home communities in the U.S., which encompass some 4.3 million homes. The bulk of these are land-lease communities in which residents own their homes but not the underlying land. Smith\u2019s proprietary program is only for homes that are titled as real property.<\/p>\n

Smith said that prior to the HUD Code, many of these units were built with a life expectancy of 15 to 20 years. By the late 2000s, he added, many of them were considered unsafe or an \u201cenergy sieve,\u201d and they needed to be replaced.<\/p>\n

\u201cBut that market is a middle-income to lower-income market, even among seniors, and they generally didn\u2019t have the cash to buy the new home,\u201d Smith said.<\/p>\n

That\u2019s when he came up with the idea of building new homes and repaying the builder or investor through the proceeds of a reverse mortgage. The process works like this:<\/p>\n