JANUARY 2004

Manufactured Housing Loans Haunt Fannie Mae

First, Fannie Mae had some accounting problems. Now, Patrick Barta tells us in the Wall Street Journal that there is a problem with Fannie Mae’s $9 billion portfolio of manufactured housing loans, i.e. mobile homes. Although Fannie Mae has usually focused on borrowers with good credit, it has recently dabbled with investments in securities backed by loans to buyers of mobile homes. The exposure to mobile-home loans occurred as a result of Fannie Mae’s investment in the securities of Conseco, Inc., which filed for bankruptcy-court protection last year. Many of Conseco’s financial problems stemmed from its large portfolio of mobile-home loans. Not surprisingly, many of these loans had gone sour in our sagging economy. The severity of the problem was revealed this past September, when the Federal Home Loan Bank of New York reported a $183 million write-off of its mobile home investment. Last month, Moody put Conseco’s mobile home securities on review for another possible downgrade.