March 6, 2015
by Michael D. Holman
Millsap & Singer, LLC – USFN Member (Missouri)
In March 2011, Missouri adopted new statutory provisions regarding affixation of mobile homes and their conversion from personal property to real property. The new rules create a rigorous process by which the owner of a mobile home, and the real estate on which the home sits, manifests his intent that the mobile home (once personal property) be given the vaunted status of real property, like a traditional site-built home. The process, while not without its own shortcomings and fresh challenges, has served to remove some ambiguity and risk, and has given definition to what was once a process based on observation and interpretation.
Previously, all that was required was that the home be permanently attached to the land and that there was unity of ownership between the home and real property. At best, the public record might have reflected a rider/addendum to a deed of trust where the borrower pledged the mobile home as additional collateral, and attested that it was — or would be — permanently attached to the land. Not only was there room for interpretation as to what qualified as “permanently attached,” there was no guarantee that a borrower would ever follow through and take steps to affix the mobile home.
Though movement of a mobile home under any circumstances is no small feat, lenders looked for the home to be embedded in a permanent concrete foundation or strapped to piers instead of merely resting on cinderblocks, waiting for the wheels to be re-mounted and the mobile home towed away. For the underwriters, the risk of the mobile home being removed in the dead of night left them feeling vulnerable, so they did what they could to mitigate the risk of loss. They were also faced with the risk that liens may have attached to the personal property, which would not be readily apparent in the same way that liens against real property might be, especially when the certificate of title for an “affixed’ mobile home might be misplaced under the mistaken belief that it was no longer relevant or valid.
In contrast, the current statute requires that documents be filed in the public record under penalty of perjury, both with the Recorder of Deeds for the county where the property is located and with the Department of Revenue’s Motor Vehicle Bureau. The two primary forms used during the affixation and conversion process are the Form 5312 “Affidavit of Affixation,” and the Form 5314 “Application for Confirmation of Conversion,” both of which are ultimately submitted to the Department of Revenue before their records are updated to reflect that the mobile home has lost its motor vehicle title and has gained an “affixation title.” The Affidavit of Affixation speaks to the physical attachment of the property, and the Application for Confirmation of Conversion swears to the quality of title. These are two issues that are essential to the affixation and conversion analysis, but which were not documented under the old statute. By making both of these documents available to the public, there should be no question as to whether a mobile home is treated as part of the real property in Missouri.
Despite statutory language to the contrary “grandfathering” manufactured homes deemed affixed prior to 2011, Missouri underwriters have taken the position that no ALTA-7 endorsements will be issued unless the current statutory affixation and conversion process has been completed. It becomes the subsequent owner’s responsibility to ensure that the new requirements are met. For a foreclosing lender, this can add between three to six months before a property is ready to market out of REO once the foreclosure sale is completed. When conveyance to HUD or the VA is contemplated, the existence of an uninsurable manufactured home creates a “title issue” that may prevent a clear owner’s policy and substantially delay completion of the process.
Beyond the timeline implications, a lender is required to make certain sworn statements to be recorded with the Recorder of Deeds and filed with the Missouri Department of Revenue; namely, that: (1) the manufactured home is, or shall be, permanently affixed to the real estate; (2) the home has the characteristics of site-built housing and is part of the land; (3) the home was built in compliance with the federal Manufactured Home Construction and Safety Standards Act; and (4) the home is, or shall be, assessed and taxed as an improvement to the land. The lender must further affirm under the penalty of perjury that the information contained in the Application for Confirmation of Conversion (Form 5314) is true and accurate as pertains to the certificate of title and the existence (or nonexistence) of additional security interests/liens against the manufactured home.
These sworn statements cannot be taken lightly, nor can the documents be signed as a matter of form. Given the gravity of the required statements, one option to limit exposure is to file a suit for replevin and declaratory judgment to affirm title to the manufactured home and obtain judgment stating that the mobile home is to be treated as affixed, prior to completing the statutory affixation and conversion process. Another is to request a detailed property inspection post-foreclosure sale for the purpose of gathering all necessary information about the manufactured home and to confirm affixation that would meet HUD requirements. Where doubt remains as to how “affixed” a particular manufactured home is, an engineer’s report from a licensed structural engineer can be requested to supplement information previously gathered from site inspections, appraisals, or other information gleaned from the loan file.
As we get further from the statute’s effective date, it is anticipated that new manufactured homes will be properly affixed at origination/initial placement and duly converted under the current rules, and that only pre-2011 manufactured homes will require additional corrective action to clarify title to the manufactured home. Until then, it is necessary that all involved parties continue to work together closely to address the special issues whenever a manufactured home is added to the mix.
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