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Did I buy a car (mobile home) or a house with land? Lender failed to foreclose on mobile home.

Many investors in real estate properties and mortgage notes ran into a problem with mobile homes on land where the property is located. How do you find out if the mobile home is a part of the real property or registered as a car at the DMV (Department of Motor Vehicles) office? Can an investor lose rights to the mobile home and still own the land?

First a few basic items on how the mobile homes are registered. A mobile home starts with a trailer on wheels with a car title registered at the county DMV office or similar department. There is a car title issued for the mobile home as proof of ownership. If the mobile home was financed, the mortgage details are typically mentioned in the body of the car title document.

If the owner of the land chooses to live in the mobile home without converting it to real property, the legal description for the real property will describe the land, as well as mention that the mobile home with VIN is located on this land. The owner of the land will need to pay real estate taxes for the land with mobile home assessment and/or maintain an active mobile home “car” title at the DMV office by paying yearly dues.

The owner can choose to convert the mobile home to a permanent house by taking the wheels off and mounting the mobile home onto a permanent base fixture, connecting electricity, water and sewage.

From the document perspective, the conversion is done differently in each state. Most states require an affixture affidavit of mobile home to the land. Also needed is a retirement of car title at the DMV office and the recording of a UCC (Uniform Commercial Code) in the county of the home location representing any open mortgage against the mobile home. If the owner takes out a new mortgage during conversion, it’s important to make sure that the mobile home mortgage assumes junior position by recording the UCC after the mortgage that has both land and converted mobile home as collateral.

There are many ways to identify the mobile home through review of real estate records:

  1. Assessor summary
  2. Legal description
  3. Affixture Affidavits or Certificate of Title (in Texas)
  4. Tax Collector separate mobile home account
  5. DMV active account under the property address
Assessor’s summary example below:

Deed’s legal description with mobile home example is below:

Tax Collector in PA example is below:
A common point of confusion is the difference between manufactured and mobile homes. Let’s simply clarify that the mobile home started as a car trailer with a car title, while the manufactured home is built and transported to be installed on the property right away. In some cases, a temporary title is issued for manufactured homes during the transportation process.

We found the states with the most defects due to incorrect mobile home conversions are GA, SC, NC, FL, PA, WV and UT.

Some of the common defects related to unconverted mobile homes are: the legal description is missing the mobile home reference on the mortgage or deed; foreclosure documents have missing or unfiled affixture affidavits; DMV accounts on converted mobile homes are not retired; and UCC mobile home mortgages are recorded ahead of the refinanced mortgage for both the land and mobile home without a subordination of position. Those are just a few common issues investors face when running due diligence on properties with a mobile home. An odd case we saw was when the lender never mentioned a mobile home in the legal description of the mortgage and therefore, due to non-payment, foreclosed on the property mentioned in the mortgage, which represented the land only. They later had to file a quiet title action to change the legal description and include the mobile home, while the borrower, who was an owner of the mobile home, continued living in the mobile home for another two years after the foreclosure.