HB-1-3555

(03-09-16) SPECIAL PN 13-1

Revised (06-28-23) PN 585

CHAPTER 13: SPECIAL PROPERTY TYPES

13.1 INTRODUCTION 

This chapter describes the requirements for processing loans for special property 

situations. Section 1 of this Chapter deals with processing requirements for community 

land trusts, properties with restrictions on resale price, leasehold estates, Native American 

restricted land, and loans on Hawaiian Home Lands. Section 2 describes the specific 

processing requirements for loans made on manufactured homes. Section 3 outlines loan 

processing requirements for modular housing. 

SECTION 1: SPECIAL FORMS OF OWNERSHIP

13.2 OVERVIEW

This section discusses processing requirements for guaranteed loans for dwellings 

that fall under special ownership types: Community land trusts, properties with 

restrictions on resale price, leasehold estates, Native American restricted land, and loans 

on Hawaiian Home Lands. Unless otherwise indicated in this section, the same basic 

requirements for loan guarantee approval discussed elsewhere in this Handbook applies 

to these loans. 

13.3 LOANS FOR UNITS IN A COMMUNITY LAND TRUST [7 CFR 3555.206]

Loans to finance the purchase of dwellings located on land owned by a community 

land trust may be guaranteed if the conditions described in this paragraph are met, and if 

the applicant and the property otherwise meet the requirements outlined in this 

Handbook. 

A. Definition

A community land trust is defined as a private nonprofit community housing 

development organization that owns and leases land at affordable prices. A community 

land trust sells the property improvements (i.e., buildings, streets, sewers) that normally 

increase the land’s value, but leases the land under a long-term ground lease to low- and 

moderate-income households. The organization must:

• Be organized under State or local laws.

• Have no part of its net earnings benefiting any member, founder, contributor, or 

individual.
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Paragraph 13.3 Loans for Units in a Community Land Trust

13-2

• Comply with financial accountability.

• Maintain, through significant representation on the organization’s governing 

board, accountability to low-income community residents regarding decisions on 

the design, siting, development, and management of affordable housing.

• Have its corporate membership open to any adult resident of a geographic area 

specified in the by-laws of the organization.

• Be established to carry out all the following activities:

• Acquire parcels of land, held in perpetuity, primarily for conveyance 

under long-term ground leases.

• Transfer ownership of any structural improvements located on such leased 

parcels to the lessees.

• Retain a pre-emptive option to purchase any such structural improvements 

at a price determined by a formula that is designed to ensure that the 

improvement remains affordable to low- and moderate-income people in 

perpetuity.

The lender must ensure that the lease contains provisions for continued use of the 

land for low- and moderate-income housing.

• The lender’s mortgage file must contain documentation that the community land 

trust has received local market acceptance, as evidenced by market acceptance of 

comparable community land trust projects in the area.

• The lender must verify that the community land trust has broad-based community 

representation, and that the Community Land Trust has a two-year record of 

providing affordable housing.

B. Protection of Lender Rights and Lien Position

The relevant legal documents must contain language that ensures that all restrictions 

relating to community land trusts will automatically and permanently terminate upon 

foreclosure or lender acceptance of a deed in lieu of foreclosure. Language that merely 

subordinates the restrictions to the mortgage is not sufficient. The restrictions also cannot 

be forced upon subsequent purchasers following resale by the lender. 
HB-1-3555

Paragraph 13.3 Loans for Units in a Community Land Trust

(03-09-16) SPECIAL PN 13-3

Revised (06-28-23) PN 585

C. Appraisals

A property located on a site owned by a community land trust must be appraised as a 

leasehold interest. 

13.4 RESTRICTIONS ON RESALE PRICE

Restrictions on the resale price of the property or recapture of equity are permitted. A 

maximum sales price may be imposed or the sales proceeds due to the borrower may be 

limited, with any excess funds payable to a governmental body or nonprofit organization 

for reuse in a community land trust or to preserve long term affordability. When such 

restrictions apply, the requirements listed below must be met. 

• The borrower must be permitted to recover at least the original purchase price, 

sales commission, and cost of capital improvements when the borrower sells the

property.

• If the program permits the borrower to sell the property at market value but 

recaptures part of the equity, the Agency considers a reasonable share of 

appreciation to be at least 50 percent. The Agency does not object to situations 

whereby the borrower’s share of appreciation is on a sliding scale beginning at 

zero, provided that within two years the homeowner would be permitted to retain 

50 percent of the appreciation.

• The borrower must be permitted to recover a reasonable amount of appreciation,

as determined by the lender. Appreciation is measured by the difference between 

the original purchase price and the actual price at which the property is resold.

• If the program sets a maximum sales price restriction, the borrower must be 

permitted to retain 100 percent of the appreciation.

A. Right of First Refusal

One method to ensure that housing remains part of an affordable housing program is 

to hold a “right of first refusal” or an “option right” that can be exercised when the 

borrower proposes to sell the home to a purchaser not eligible for the program benefits. 

Such a provision is permitted if all the requirements listed below are met. 

• The rights must be held only by a governmental body or eligible nonprofit 

organization and exercised by them, or someone they have identified as an 

eligible purchaser.
HB-1-3555

Paragraph 13.4 Restrictions on Resale Price 

13-4

• Any right must be exercised within 45 days after the holder of these rights may 

exercise them (for example, the rights are often triggered by a notice of sale from 

the borrower).

• Any option price must allow the borrowers to recover their investment plus 

reasonable shares of appreciation.

13.5 LOANS ON LEASEHOLD ESTATES [7 CFR 3555.203(b)]

Loans to finance the purchase of dwellings located on a leasehold estate may be 

guaranteed if the conditions described in this paragraph are met, and the applicant and the 

property otherwise meet the requirements outlined in this Handbook.

A. Definition

A leasehold estate is the right to use and occupy real estate for a stated term and 

under certain conditions that have been conveyed by a lease. In most cases, 

improvements to real estate are purchased in fee simple, subject to ground rent. Rent is 

paid for the right to use and occupy the land.

The lender’s mortgage file must have documentation indicating the appropriate legal 

documents have been reviewed for compliance with Agency regulations.

B. Lease Requirements

Mortgages subject to leasehold estates must meet the following conditions:

• The mortgage must cover both property improvements and the leasehold interest 

in the land.

• The leasehold estate must constitute real property, be subject to the mortgage lien, 

and be insured by a title policy.

• The estate’s term runs fifteen or more years beyond the maturity date of the loan 

closing., except in the case of properties located on Native American restricted 

land. See section 13.6 for guidance regarding loans on Native American restricted 

land.

• The leasehold estate must be assignable or transferable.

• The lease cannot be terminated except for nonpayment of lease rents.
HB-1-3555

Paragraph 13.5 Loans on Leasehold Estates

(03-09-16) SPECIAL PN 13-5

Revised (06-28-23) PN 585

The lease must:

• Provide for lender notification of any default by the borrower and the option to 

cure the default.

• Provide that the borrower will pay taxes, insurance, and association dues (as 

applicable) on the land and retain voting rights in the association.

• Provide that the leasehold can be transferred, mortgaged, and sublet without 

restriction.

• State rental increases in exact dollar amounts.

• Be recorded and constitute an interest in real estate.

• Permit mortgaging of the leasehold.

• Provide for written notice of default.

• Provide renewal options for the leasehold mortgagee.

13.6 LOANS ON NATIVE AMERICAN RESTRICTED LAND

A. Definition

Native American restricted lands are lands in which title is held by the United States 

in trust for an Indian tribe or which is held by an Indian tribe or individual subject to a 

restriction by the United States against sale, transfer, or encumbrance.

B. Requirements

Trust or restricted land must remain in trust or restricted status. The mortgage, deed 

of trust, leasehold interest, or other security interest must be approved by the Secretary of 

the Interior. For loans to Native Americans on restricted or trust land, the lender must 

obtain:

• Evidence that the tribe has enacted legally binding and effective foreclosure

procedures and will enforce those procedures upon notice of default from a

lender.
HB-1-3555

Paragraph 13.6 Loans on Native American Restricted Land

13-6

• Evidence that the tribe has enacted legally binding and effective eviction

procedures and will enforce those procedures upon notice of default from a

lender.

• Evidence that the tribe has adopted procedures ensuring that the guaranteed loan 

will always have first lien priority (if applicable) and will be satisfied before all 

other property debts (with the exception of tribal taxes) or has adopted legislation 

requiring the tribe to follow state or local priority of lien procedures.

• A copy of the tribe's lease for use on residential land.

• The lender will adhere to the tribe's mortgage, foreclosure, and eviction

procedures.

• The mortgage must cover both property improvements and the leasehold interest 

in the land.

• The leasehold estate must constitute real property, be subject to the mortgage lien, 

and be insured by a title policy.

• The leasehold estate must be assignable or transferable.

• The lease cannot be terminated except for nonpayment of lease rents.

The lease must:

• Have an unexpired term at least equal to the term of the loan. Leases for a period 

of 25 years, renewable for a second 25 years are permissible.

• Provide for lender notification of any default by the borrower and the option to 

cure the default.

• Provide that the borrower will pay taxes, insurance, and association dues (as 

applicable) on the land and retain voting rights in the association.

• Provide that the leasehold can be transferred, mortgaged, and sublet without 

restriction.

• State rental increases in exact dollar amounts.

• Be recorded and constitute an interest in real estate.
HB-1-3555

Paragraph 13.6 Loans on Native American Restricted Land

(03-09-16) SPECIAL PN 13-7

Revised (06-28-23) PN 585

• Permit mortgaging of the leasehold.

• Provide for written notice of default.

• Provide renewal options for the leasehold mortgagee.

13.7 LOANS ON HAWAIIAN HOME LANDS

A. Definition.

Hawaiian Home Lands consists of property owned by the State of Hawaii, 

Department of Hawaiian Home Lands (DHHL) and held in trust for Native Hawaiians. 

An applicant purchasing a home on Hawaiian Home lands must be a Native Hawaiian, as 

determined by DHHL.

B. Requirements 

In order for a mortgage with a Hawaiian Home Lands lease to be eligible for 

guarantee, the property shall be located within an area designated as Hawaiian Home 

Lands, and DHHL shall have granted to the applicant a homestead lease covering the 

property. For loans to Native Hawaiians on Hawaiian Home Lands, the lender must 

obtain:

• Certification that the lease provided by DHHL is not in default and has not been 

cancelled.

• All other requirements set forth in 7 CFR Part 3555 and any successor regulation.

• All other requirements set forth in an MOU between DHHL and USDA Rural 

Development which is available in the USDA LINC Training and Resource 

Library, located at www.rd.usda.gov/resources/usda-linc-training-resourcelibrary/loan-origination

C. Recording 

Mortgages on Hawaiian Home Lands leaseholds are recorded in the recording system 

established at DHHL. 
HB-1-3555

13-8

SECTION 2: MANUFACTURED HOMES

[7 CFR 3555.208]

13.8 DEFINITION

Manufactured homes are single-or multi-width units constructed partially off-site and 

transported to a site to be completed and anchored to a permanent foundation. 

Manufactured homes are structures built to the Federal Manufactured Home Construction 

and Safety Standards (FMHCSS) and display a red certification label on the exterior of 

each transportable section. They are not the same as a modular home. The Certification 

Label shall be affixed in a location that is in accordance with an approved design and 

accommodates any Design Approval Primary Inspection Agency (DAPIA)-approved OnSite Completion of Construction or Alternative Construction letters. The Certification 

Label must be affixed in a location that will remain visible after all work is completed 

that is necessary to complete the installation of the home at the home site. 

Unless, otherwise specified in this section, the guidelines and procedures outlined in 

Chapters 6 and 12 for new construction should be followed. 

13.9 AUTHORIZED LOAN PURPOSES

The following are eligible loan purposes for the financing of manufactured homes:

• Site development work that conforms to the standards imposed by the state and 

local government. 

• Purchase of an eligible new unit, transportation, and set-up costs. The following 

criteria outlines an eligible manufactured unit for guarantee with the SFHGLP: 

o Must be a new unit in stock that has never been installed or occupied at 

any other site or location. Manufactured units may be moved only from 

the manufacturers or dealer’s lot to the site on which the unit will be 

financed.

o Must have a floor area of not less than 400 square feet.

o Must be placed on a permanent foundation built to FHA guidelines in 

effect at the time of certification. Guidelines are presently published in 

the “Permanent Foundation Guide for Manufactured Housing” (HUD4930.3G) which is found at 

http://www.huduser.org/portal/publications/destech/permfound.html.

o Meet or exceed the Federal Manufactured Home Construction and Safety 

Standard (FMHCSS) Uo Value Zone for the geographic area the unit will 
HB-1-3555

Paragraph 13.9 Authorized Loan Purposes

(03-09-16) SPECIAL PN 13-9

Revised (06-28-23) PN 585

be placed. The Uo Value Zone will be indicated on the Comfort Heating 

and Cooling Certificate. Builder must certify thermal requirements at time 

of purchase have been met.

o Must have a manufacture date that is within 12 months of the purchase 

contract. The manufacture date can be found on the data plate located 

inside the home.

 As an alternative to the original HUD Certification Label(s), the 

lender may obtain a verification letter with the same information 

contained on the HUD Certification Label(s) from the Institute for 

Building Technology and Safety (IBTS). A duplicate HUD Data 

Plate may be available from IBTS or by contacting the In-Plant 

Primary Inspection Agency (IPIA) of the manufacturer. A list of 

IPIA and DAPIA offices is posted on HUD’s website located at

https://www.hud.gov/program_offices/housing/rmra/mhs/csp/mhsi

d.

• Financing of an existing unit due to a transfer of an existing Section 502 Direct or 

Guarantee loan or purchase of a Real Estate Owned (REO) property. Repairs 

associated with these transactions may be included. 

13.10 LOAN RESTRICTIONS

The Agency will not guarantee loans to finance the following:

• The purchase of a unit without an eligible site.

• Repairs not associated with a transfer, Real Estate Owned (REO) sale, or unit that 

is already financed with a Section 502 loan.

• Furniture, including movable articles of personal property such as drapes, beds, 

bedding, chairs, sofas, divans, lamps, tables, televisions, radios, stereo sets, and 

other similar items of personal property. Furniture does not include wall-to-wall 

carpeting, refrigerators, ovens, ranges, washing machines, clothes dryers, heating 

or cooling equipment, or other similar equipment.

• Additions and modifications on new or existing units are prohibited except for 

porches, decks, or other structures built to engineered designs and inspected and 

approved by a local building code official.

• Purchase of a unit to be moved from a site other than the manufacturer/dealer lot 

to the site securing the mortgage loan. 
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Paragraph 13.10 Loan Restrictions

13-10

• Manufactured home units with a manufacture date exceeding 12 months of the 

purchase agreement contract.

• A unit with a tow hitch or running gear remaining.

13.11 CONSTRUCTION AND SITE REQUIREMENTS

The borrower will contract with a licensed manufactured dealer. Manufactured homes 

must meet the site and other requirements for new dwellings in accordance with Chapter 

12 of this Handbook. The lender’s permanent file must contain the following:

• An itemized cost breakdown of the total package, including the base unit, eligible 

options, site development, installation, set-up, lot costs, and any credit for wheels 

and axles. 

• Dealer certification that any cash payment or rebate as a result of the purchase 

will be deducted from the price of the unit and not paid directly to the applicant.

• Dealer certification that proposed cost is the full price of the unit. If furniture is 

being purchased by the applicant with personal funds, a lien will not be filed 

against the security property.

• Foundation plan designed to meet the HUD Handbook 4960.3G. Permanent 

Foundations Guide for Manufactured Housing, (PFGMH) guidelines. The 

PFGMH guide is available at:

http://www.huduser.org/portal/publications/destech/permfound.html.

• Plot and site development plans.

• Inspections in accordance with Chapter 12 of this Handbook.

• Contractor certification that multi-sectioned units were properly joined and sealed 

according to the manufacturer's specifications and the home sustained no damage 

during transportation and set-up. 

13.12 LOAN CLOSING FOR MANUFACTURED HOUSING

Loan closing procedures are the same whether the guarantee is made for the purchase 

of a manufactured home or another type of single-family home. However, the lender 

should be aware of the following requirements. 
HB-1-3555

Paragraph 13.12 Loan Closing for Manufactured Housing

(03-09-16) SPECIAL PN 13-11

Revised (06-28-23) PN 585

A. Warranty Requirement

A dealer must provide the borrower with a copy of all manufacturer warranties. The 

warranty must identify the unit by serial number. A copy of all warranties and 

certifications will be retained in the lender’s permanent file.

B. Certification Requirements

Lenders may utilize Attachment 13-A to document manufactured dealer certifications 

required of this Chapter and Attachment 13-B to document contractor certifications 

required of this Chapter.

C. Lien Release Requirements

The dealer must furnish a manufacturer's certificate of origin indicating that the unit 

is free and clear of all legal encumbrances. A copy of the manufacturer’s statement or 

certificate of origin will be retained in the lender’s mortgage file.

D. Real Estate Tax Requirement

As required by the local taxing authority, the unit and site must be classified, zoned,

and taxed as real estate. Certificate of title to the manufactured home must be surrendered 

to the appropriate state government authority if state law permits. 

E. Title and Lien Requirements 

Both the unit and the site must be evidenced by a recorded mortgage or deed of trust. 

A combination of a chattel and real estate mortgage is not acceptable. If the certificate of 

title cannot be surrendered, the lender must indicate its lien on the certificate of title. 

SECTION 3: MODULAR HOMES

Modular homes are sectional prefabricated houses that consist of multiple modules or 

sections which are typically manufactured in a remote facility and delivered to their site 

of intended use. They differ from manufactured homes largely in their absence of axles 

or frame. Modular dwellings are commonly transported to their site by means of flat-bed 

trucks and set in place with the assistance of a crane. Modular homes, whether “off 

frame” or “on frame”, are considered stick-built homes; therefore, the guidance outlined 

in Chapter 12 of this Handbook will be followed for new and existing modular homes. 
HB-1-3555

Attachment 13-A

Page 1 of 1

(03-09-16) SPECIAL PN

Revised (06-28-23) PN 585

ATTACHMENT 13-A

Dealer Certification – New Manufactured Home

Name(s) of Purchaser/Owner: Manufactured Home Dealer Name, 

Address and Telephone:

Property Address:

Manufacturer, model, data plates of unit purchased:

The undersigned hereby certifies:

• That any cash payment or rebate as a result of the purchase of the manufactured unit 

identified has been deducted from the price of the unit and was not paid to the identified 

purchaser/applicant.

• The proposed cost of the identified unit represents the full price of the unit, excluding any 

purchase with personal funds by the purchaser for furniture.

• If furniture was purchased in conjunction with this transaction, we certify a lien will not 

be filed against the security property.

• Thermal requirements in effect at the time of purchase have been met.

Signature: 

 

Title: 

 

Date: 

 
HB-1-3555

Attachment 13-B

Page 1 of 1

(03-09-16) SPECIAL PN

ATTACHMENT 13-B

Certification of Builder/Contractor

Name(s) of Purchaser/Owner: Builder/Contractor’s Name, Address and 

Telephone:

Property Address:

Manufacturer, model, data plates of unit purchased:

The undersigned hereby warrants:

• The manufactured unit identified has been erected on the subject identified property.

• The property development complies with construction plans.

• The unit, if manufactured in separate sections were properly joined and sealed 

according to the manufacturer’s specifications.

• The manufactured home sustained no hidden damage during transportation and 

erection.

Signature: 

 

Title: Date: