Program Purpose
The Mobile Home Change-Out Program provides existing income eligible mobile home owners with a silent second subsidy of $60,000 to facilitate the replacement of their home with a new manufactured unit. The Program goals are to:
- Provide income eligible mobile home owners with an opportunity to upgrade their home and improve their housing quality without having to acquire a new home in Santa Cruz County
- Create long-term affordable owner-occupied housing by restricting the resale price of the new replacement home. Owners are allowed modest equity gains, but will not realize windfall profits from the sale of their homes at unrestricted market price
Applicant eligibility
- Applicant must presently own and occupy their mobile home as their primary place of residence and the home must be located in the unincorporated Santa Cruz County area (outside of the four city limits) in a State licensed mobile home park.
- If living in a resident owned park (ROP), the applicant must be in good standing with the ROP Board of Directors.
- The household’s gross annual income cannot exceed 120% of area median income (AMI), as adjusted for household size:
2008 Mobile Home Change-Out (MHC) Program |
Household Size |
1 |
2 |
3 |
4 |
5 |
Income Limit 120% of AMI |
$68,300 |
$78,100 |
$87,800 |
$97,600 |
$105,400 |
County “silent second” shared appreciation subsidy guidelines
- $60,000 maximum subsidy.
- No monthly payments.
- A share of the home’s appreciation is paid to the County only upon sale or transfer of the home. This “shared appreciation” charge, is derived by calculating the percentage increase in the price of the home from the date the replacement project is complete (see “Base Value” definition below) to the date the home is sold, as applied to the principal amount of the Agency Subsidy.
- Subsidy cannot be prepaid. County will subordinate its subsidy to a new first mortgage refinance, when necessary.
- Subsidy is secured by a lien on title, generally in the second lien position.
- Subsidy funds may be used only for approved project costs.
- Existing debt cannot be refinanced with the County subsidy.
Resale Price Restriction
- In exchange for the County’s “silent second” mortgage, applicants enter into a resale price restriction agreement with the County.
- Applicants are not eligible for temporary relocation benefits from the County because each applicant is undertaking the project voluntarily.
- The “Base Value” of the new manufactured home, which is used to determine all future resale prices, is the lesser of:
- The original “as-is” appraised market value of the property plus the total project cost, or
- The post replacement appraised market value of the home. *
- Appraisals purchased by lenders or applicants may be averaged to calculate the restricted resale price.
NOTE: Applicants, especially in senior-only mobile home parks, may initially lose some of their property’s equity because the overall cost of a replacement project may be more than the enhanced market value of their home after replacement. It is, therefore, extremely important for applicants to look closely at project costs before undertaking the replacement project.
- The resale price is limited and can increase only as much as the percentage increase in Santa Cruz County area median income (“AMI”) as applied to the Base Value. In 2007, the average percentage increase in AMI was 8%. Just as in the open market, there is no guarantee of future appreciation.
- There is no term limit for the resale agreement. It is in full force until the home is sold.
Replacement unit standards
The replacement unit must be a new double or single wide, single story, manufactured home including accessories, such as step units, porch awnings, carport awnings and skirting per HCD and Park specifications.
- Unit must meet State HCD lot setback standards and County parking ordinance requirements.
- Park management must approve the replacement unit project.
- Applicant must get at least two “turn-key” bids from licensed manufactured home dealers that include detailed unit specifications and total project costs. The scope of work must include demolition and removal of existing mobile home, site preparation, set-up and installation of all accessories. County will review and approve all bids and contracts prior to Applicant ordering unit.
*Based on an appraisal commissioned and paid for by the County.
- A local third party escrow is required for the purchase of the replacement uni
Eligible project expenses
New unit, construction and escrow costs including, but not limited to:
- Removal and demolition of existing unit
- Site preparation
- New manufactured home including sales tax
- Delivery charges
- On-site setup and foundation
- New accessories such as decks, stairs, awnings and skirting
- HCD licensing and escrow fees
- First lender subsidy, escrow and title costs
- County subsidy, escrow and title costs
Typical fund disbursement process (in conjunction with a new first mortgage subsidy)
- First lender prepares and forwards a first subsidy approval letter to manufactured home Dealer/Contractor (“Dealer”).
- County prepares and forwards a second subsidy approval letter of up to $60,000 to Dealer.
- Owner makes a cash deposit of their portion of the “Change-Out” upfront.
- Dealer opens a third party escrow account with a local, County approved Title Company.
- Just prior to shipping new unit, owner stores all household furniture and items and moves out of unit into temporary quarters during construction (estimated to be 6 - 8 weeks).
- Old unit is removed from site, ground is prepared and new manufactured home is installed with all attachments (step units, awnings, etc.) to a “turn key” condition.
- Two weeks prior to expected completion of new unit, first lender (if necessary) and County close subsidies, prepare escrow instructions and deposit documents and lien forms to escrow.
- State HCD completes final inspection and signs off on new unit ready for occupancy.
- County staff inspects unit and approves project completion.
- County deposits subsidy funds to escrow.
- Owner moves back in.
- Escrow company pays Dealer, finance, escrow and title fees, processes title transfer and HCD lien forms and closes escrow.
- Any remaining funds are paid back to Owner.
New first mortgage financing (or refinancing) made in conjunction with the replacement project
- New first mortgages must be conventional 20-year fixed interest rate, or conventional 30-year fixed interest rate due and payable in 20 years, made under standard underwriting criteria.
- The applicant’s maximum qualifying debt-to-income ratios (for the first mortgage only) cannot exceed 40% / 47% and cannot be less than 28% / 28%.
- The combined subsidy to value (CLTV) cannot exceed 95% of the Base Value.
General program guidelines
- To thoroughly understand the County subsidy and resale controls, applicants must meet with County staff prior to opening escrow and review and sign the Program’s disclosure statement.
- Home must be owner-occupied and the primary place of residence of the owner.
- Future cash-out refinances, with County subordination, are allowed under certain conditions.
- Third liens may be approved after notice to County.
Resale guidelines
Owner is responsible for the sale of the home in accordance with the following procedures:
- Owner delivers a "Notice of Intent to Sell" to County.
- County orders a market value appraisal.
- County staff inspects unit for capital improvements and damage.
- County determines restricted resale price under resale agreement.
- The County has the right of first refusal to purchase the home at the restricted resale price
- Owner's real estate agent lists and sells home to the County itself or to a County qualified, median income purchaser who is eligible for and utilizes a First Time Home Buyer (FTHB), down payment assistance subsidy of up to 25% of the purchase price. Eligibility requirements for a FTHB subsidy are as follows:
- Buyer must be a first time homebuyer (may not have owned a manufactured home in the last three years) with exceptions for seniors;
- At least one buyer must live or work full-time in the County (at least 35 hours per week) with exceptions for those on fixed retirement or disability income;
- Household income may not exceed 100% of area median income, as adjusted for household size, for the County of Santa Cruz as determined annually by the State Department of Housing and Community Development;
- Buyer must own and occupy the home as their principal place of residence;
- Buyer must be able to contribute at least 3% cash down payment plus closing costs;
- Buyer must qualify for a first subsidy with a county preferred mobile home lender, unless it is a cash purchase;
- The first subsidy terms must be 20-year fully amortized fixed interest rate, or 30-year fully amortized fixed interest rate due and payable in 20 years;
- Buyer’s debt-to-income ratios may not exceed 40% of gross monthly income for housing costs, and 47% for total monthly debt; and
- Buyer understands that the manufactured home will have permanent resale restrictions.
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Upon resale, owner (seller), purchaser and County pay the following normal and reasonable costs associated with the sale and purchase of the home:
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Owner pays all of the real estate commissions.
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County pays for an appraisal to determine the fair market value of the home.
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Purchaser pays for a housing inspection report.
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