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30590_1970-1974

30590_1970-1974

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Published by: fedfraser on May 05, 2014
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Bank Financing of Mobile Homes
Mobile homes have become a significant
 
factor in the housing market in recent years.
 
During the past 2 years they accounted for
 
nearly one-third of the total new supply of 
 
single-family shelter units, and by far the
 
majority of those valued under $15,000.
 
The relative importance of mobile homes
 
has doubled since the mid-1960’s.1For
 
purposes of this article, the term “mobile
 
home” refers to a complete dwelling unit
 
built on a chassis and capable at time of 
 
purchase of being towed over the highway by
 
truck but not by car; travel trailers are
 
excluded.The demand for mobile homes, which
 
continued to grow almost without inter ruption until 1970, may be attributed, in
 
part, to several factors: One, such homes
 
are considerably less costly, on average,
 
than single-family dwellings, and they are
 
sold virtually furnished. Second, mobile
 
home loans have become more readily
 
available. Mobile home loans to consumers
 
are customarily made as instalment loans,
 
rather than as mortgage loans; the latter
 
have lower interest rates and longer terms.
 
In recent periods of tight money, it was of ten easier to obtain an instalment loan to
 
buy a mobile home than to get mortgage
 
funds for purchase of conventional housing.
 
Third, mobile homes have become more
 
widely acceptable as family living accom modations because of their increased size
 
and amenities. The 8- and 10-foot widths
 
common in the past have given way to a
1
See chart
on
page
176 of
this Bulletin.Note.
—This article was prepared by Mrs.
 
Katharyne P. Reil, Economist in the Consumer Credit
 
and Finances Section, of the Board’s Division of Re search and Statistics.
standard 12-foot width, which now accounts
 
for 84 per cent of the new mobile home
 
market.2In addition, double-width and ex pandable mobile homes are available for
 
those desiring still more space. And finally,
 
many attractive mobile home parks have
 
been developed in recent years to accommo date this type of housing.The trend toward more spacious mobile
 
homes has resulted in higher prices and
 
larger loans. In the past most purchases of 
 
mobile homes have been financed through
 
banks and finance companies. But the lend ing powers of savings and loan associations
 
recently have been expanded to include
 
some mobile home financing. Furthermore,
 
in 1970 special provisions by the Veterans
 
Administration made available direct loans
 
for purchases of mobile homes; thus far,
 
however, little use is believed to have been
 
made of such financing.Despite the growth in the use of mobile
 
homes, no comprehensive statistics have
 
been available on the total amount of credit
 
provided for such purchases. In order to
 
determine the extent of bank participation
 
in such financing, a supplemental question naire was added to the June 30, 1970, Call
 
Report for all banks. The results of this ques tionnaire are shown below. The 1970 Survey
 
of Finance Companies requested similar
 
data from those companies, and the results
 
will be published in a forthcoming issue of 
 
the
Bulletin.
Responses to the Call Report question naire revealed that banks held approximately
 
$3.2 billion of mobile home credit on June
 
30, 1970 (Table 1). The widespread avail ability of this type of financing is evidenced
- Mobile Homes Manufacturers Association,
 Mo  bile Home Financing
, 1969.
179
 
March 1971
 
180FEDERAL RESERVE BULLETIN □ MARCH 1971
TABLE 1TYPES OF BORROWERS: MOBILE HOME CREDIT OUTSTANDING AT COMMERCIAL BANKS, JUNE 30, 1970
 
By Federal Reserve district
Amount outstanding (in millions of dollars) to— Federal Reserve districtTotalIndi-viduals(IS)Businesses (1C)TotalIndi-viduals(ia)Businesses (1C)Farmers(ib)TotalFloor planningFarmers(lb)TotalFloor planningBoston
......................................
93.480.4.112.97.9219211116752 New York.................................196.9163.9.432.614.42282123390fV
S
Philadelphia
.............................189.9174.4.914.6r 11.52922723510678Cleveland.................................
253.1220.95.626.6f n862360275156112Richmond.................................272.1239.02.330.815.152050282152107Atlanta
.....................................
502.3440.54.557.333.31,2611,197216446322Chicago
....................................
522.6467.84.150.742.61.8291,749329440351St. Louis...................................210.8179.65.425.815.01,2521,106318344236Minneapolis
.............................
99.281.34.313.610.51,045919350196133Kansas City
.............................
217.5181.74.231.621.41,4811,347378315216Dallas
.......................................155.6128.11.925.618.5930858117314232San Francisco...........................462.6405.85.051.841.13233065212699All districts...........................3,176.02,763.438.7373.9243.110,0039,2811,9962,7522,010 Number of banks with loans to— i Amounts represent financing of the purchase of new and used mobile homes (direct loans and purchased paper) included in Schedule A of the Call Report of Condition, as part of the following:(a) Item 6 (c), “Loans to individuals to purchase other retail consumer goods,” (consumer instalment loans);(b) Item 4, “Loans to farmers”; and (c) Item 5, “Commercial and industrial loans,” (business purchases).
by the fact that more than 10,000 banks—
 
about three-quarters of all commercial banks
 
reported such credit outstanding. Nearly
 
seven-eighths of the mobile home credit in
 
commercial banks’ loan portfolios was re ported as consumer instalment loans. Most
 
of the remainder was in loans to businesses.
 
Loans to farmers for the purchase of mobile
 
homes constituted only 1per cent of the
 
total.Bank financing of mobile homes for busi nesses covers a wide variety of purposes, but
 
about two-thirds of this credit was used for
 
financing retailers’ inventories of mobile
 
homes. The remainder was scattered among
 
loans to finance the purchase of mobile units
 
for such uses as engineering headquarters or
 
storage at construction sites, temporary
 
banking and school facilities, and interim
 
office space at new or expanding factories.Replies to the Call Report questionnaire
 
indicated that, as a group, banks making
 
mobile home loans to individuals were
 
also active in other types of instalment lend ing to consumers. These banks accounted
 
for about four-fifths of all consumer instal ment credit outstanding at commercial banks
 
and for an even larger proportion of non automotive consumer goods credit, in which
 
mobile home loans are classified.Banks with large instalment loan port folios—$50 million or moreheld more
 
than one-third of the mobile home loans
 
outstanding, even though building codes or
 
zoning restrictions often prevent the use of 
 
mobile homes in large cities or metropolitan
 
areas (Table 2). Banks having less than $20
 
million in instalment loans held one-half of 
 
the mobile home total, about equally divided
 
between banks in the $5 million to $20 mil lion class and banks with less than $5
 
million. The under-$20-million groups,
 
which include few large city banks, also
 
provide nearly three-fifths of all floor-plan
 
financing of dealer inventories.Consumers’ indebtedness to banks on
 
mobile homes accounted for a substantial
 
part of the nonautomotive consumer goods
 
total—nearly one-half for banks that were
 
financing mobile homes, and about two-
 
fifths for all commercial banks (Table 3).
 
The proportion for banks with mobile home
 
March 1971
 
BANK FINANCING OF MOBILE HOMES181
TABLE 2DISTRIBUTION OF MOBILE HOME LOANS
 
OUTSTANDING AT COMMERCIAL BANKS
In per centSize category (in millions of dollars)Loans to individualsFloorplanloansA. Total instalment loans:Under 5...............................................2527520......................................................24312050....................................................161750 and over.........................................3525All size groups................................100100B. Total deposits:Under 10.............................................910_25 ..................................................142550....................................................1550100..................................................9100500................................................255001,000............................................121,000 and over 
...................................
16All size groups
................................
100
credit was somewhat larger than the average
 
in four Federal Reserve districts—New
 
York, Philadelphia, Atlanta, and Chicago—
 
and considerably smaller—less than 30 per
 
cent—in the Dallas District.Bank holdings of mobile home credit at
 
the end of June 1970 varied widely among
 
the 12 districts. The Atlanta, Chicago, and
 
San Francisco Districts had the largest
 
shares, and together they accounted for
 
nearly one-half of all bank loans outstanding
 
to consumers for mobile homes. The Boston
 
and Minneapolis Districts had the smallest
 
holdings, each with only 3 per cent of the
 
U.S. total; the Dallas District held only 5
 
per cent even though it included Texas, one
 
of the top 10 States in amount of mobile
 
home credit outstanding. Approximately
 
one-third of all mobile home loans outstand ing were in four States—California, Pennsyl vania, Florida, and Michigan (Table 4,
 
page 182). About 3,000 of the 10,000banks financing mobile homes were located
 
outside of Standard Metropolitan Statistical
 
Areas, but the mobile home paper they held
 
represented about two-thirds of the total
 
for all banks in the United States.
TABLE 3IMPORTANCE OF MOBILE HOME CREDIT
 
OUTSTANDING IN CONSUMER CREDIT
 
TOTALS AT COMMERCIAL BANKS
In per centFederal Reserve district>■5'At all banks, relative to— At banks with mobile home credit, relative to— Totalinstal-mentcredit Nonauto-motivegoodscreditTotalinstal-mentcredit Nonauto-motivegoodscredit439547330754Philadelphia
.....................
6509555466496406459471051739950843846Minneapolis
.....................
627840Kansas City
.....................
742847426529San Francisco..................643644All districts
..................
640747
Note.—
Figures for mobile home credit in this table represent consumer instalment loans outstanding for purchase of mobile homes.
Many States with low per capita income
 
were among the largest in bank holdings of 
 
mobile home paper. These States generally
 
have large rural populations and low land
 
values, sometimes combined with a warm
 
climate conducive to mobile home living. In
 
contrast, several States with large industrial
 
or urban areas and high per capita income
 
also rank high in mobile home lending.
 
These include Pennsylvania, California,
 
Michigan, Ohio, Illinois, and Indiana.
 
March 1971

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