Loan to Value information

[Chris Carlson]

It has been brought to my attention that anxious insureds and pushy lenders are increasingly seeking to secure MH insurance greatly in excess of the value of the actual home due to opposing methods of valuation.

In this lending market, lenders are eager to lend to the fullest extent, and obviously are taking into consideration the value of the land under a mobil home for a quasi-global mortgage in instances when a MH buyer either owns or is buying the land under which the MH sits. In opposition to this, MH insurance covers only the manufactured home (generally taking into consideration age and depreciation), detached out-buildings, and personal property. No land value is computed into this valuation.

The moral risk associated with greatly over-insuring due to inclusion of land values is obviously something insurers are attempting to avoid. Yet, lenders continue to lend based on total values they compute, and insurance companies become obliged for at least the cancellation notice period to endorse to values agents with binding authority submit.

The sad outcome is ultimately no insurer will insure to the value requested by the lending institution, and insureds are in breach of contract for not obtaining sufficient insurance for a loan.

Are you aware of any articles that address this issue, and is the MH insurance industry addressing this issue through any education and publishing means?

[rmurray]

I will be waiting on others opionions on this...I have had the same question of lenders with no good answers..

Of course stick built homes are insured the same way...including the land..
I am sure this is the main reason that stick built insurance is lower priced than manufactured homes...since there is no way the insurance company can pay out all of the money...the land and improvement are always there...This means part of the coverage is non-existant..and prices can be lower per 1000...

I have never heard of a mortgage company foreclosing a good paying customer because the amount of coverage was too low...Since most insurance policies are fopr ACV...or replacement cost...the insurance company has NO greater risk insuring the larger number...It is the consumer getting stuck paying for coverage that does not exist...Sure would like the mortgage companies to correct their ways...Or an inovative insurance company to offer land/home..manufactured home insurance at any amount the lender asks but price it at that actual value of the home...

[Sue]

Land is never insured by an insurance company when they insure a manufactured home or a site built home. Most lenders/investors will waive a certain dollar amount od insurance as long as the property is insured with a replacement value type policy. Hope this helps.

[rmurray]

I know they will not pay for more than the home....but most lenders will require insurance to cover the amount of the loan...If the home is 65K...land..25K and improvements 10K...Loan about 100K..coverage required is 100K...for most lenders there is no exception...This is the problem the fellow was talking about....

[jimmie newcomb]

I am purchasing an acre of land and it has a 1986 fleetwood mobile home 14 x 65'. 3 bedroom 2 bath with furniture. I am trying to find a value of the trailer and furniture to purchase insurance coverage. Could you help me with this? thanks for any information you could provide.