Fannie Mae’s ADU Policy Updated
On September 2, 2020, FNMA updated their policy allowing for Accessory Dwelling Units (ADU) on Single Family Residential (SFR) properties to be a Manufactured Home.
This is in their Selling Guide Announcement SEL-2020-05, linked below.
An accessory dwelling unit (ADU) is an additional living area that is independent of the primary property and has basic bathroom, cooking, and sleeping facilities. With this update, we clarified ADU property eligibility and comparable sales requirements in the appraisal as follows:
- expanded the current definition of an ADU to improve proper classification of ADUs;
- expanded property eligibility by allowing multi-width manufactured homes titled as real property to be eligible as an ADU; and
- allow appraisal flexibilities that now include the use of
- an aged settled sale to demonstrate market acceptability, and
- an active listing, or a pending sale as a supplemental exhibit to show marketability.
Effective: Lenders may take advantage of these updates immediately.
NOTE: some properties have a small living unit called a ‘Park Model Home’ as an ADU, normally for the use of an aged family member. Park Model Homes are no more than 400 s/f in size, and are considered to be PERSONAL PROPERTY. These are not eligible for normal mortgage financing.
Park Model Homes are also not considered to be approved as an ADU under FNMA guidelines. In many cases, the wheels/axles are still attached, and the hitch may be also. These units often are placed on properties under a Conditional Use Permit by the local jurisdiction, with the stipulation that they be removed once the allowed use ends.
Appraisers who encounter a Park Model Home (or similar) on a SFR property should note the existence of the unit, and include at least one photo of it in the report, but do not include the Park Model living space in the home’s GLA, or value this unit in the appraisal.
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As the originator of the original post about this ADU topic, I want readers to know there is updated info.
Another appraiser caught this verbiage in the FNMA policy doc: “….allowing multi-width manufactured homes….”
The word “MULTI-WIDTH” is the key.
I did some further checking on this.
FNMA does not CURRENTLY allow any SINGLE-WIDE manufactured home as an ADU, and in fact, they do not CURRENTLY buy loans on any property where the primary dwelling is a SINGLE-WIDE. This is per their Selling Guide, as of my research on Sept. 8, 2020. Their policy may change in the future. They only process loans when the MFH is a DOUBLE-WIDE or larger (3-4 sections).
On the other hand, FreddieMac DOES allow S-W’s as ADU’s, and they DO buy loans when a S-W is the residence. Their policy is slightly different between the primary residence and ADU in terms of sizes. This is also per their own Selling and Servicer Guide.
I don’t know policies of FHA or VA regarding ADU’s and manufactured homes.
So Dave, I have a situation that calls for your knowledge. I have submitted a mortgage for refinance to a lender. the lender has come back to me and denied the loan because of the property type. They say it is against fnma guidelines. The property is a SFR with a detached ADU and a detached ALQ. I have provided building permits to show these structures are legal and consistent with the zoning regulations. the lender is saying there are 2 ADU’s on the property and the loan would not be saleble to FNMA. the issue is, the building permits describe the property as SFR with ADU and ALQ. the ALQ has a different name because it is not a dwelling. it is simply a guest home or granny quarters. it is smaller than the ADU also. No kitchen in the ALQ. I have been arguing with the lender because they did close 2 separate refinances on the property within the last year and a half. Now they are saying the ALQ is an ADU also. Is this true? a ALQ can’t be considered an ADU is that correct on my understanding? The fnma guideline simply states Only one ADU is permitted on the parcel of the primary one-unit dwelling and ADUs are not permitted with a two- to four-unit dwelling. Again, this is a SFR with an ADU and ALQ. Who is correct in this matter?
I don’t know FHA’s policy on ADU but for VA:
“An Accessory Dwelling Unit (ADU) is a living unit including kitchen, sleeping, and bathroom facilities added to or created within a single-family dwelling, or detached on the same site. A manufactured home on the site could be an ADU. The dwelling and the ADU together constitute a single real estate entity.”
Thank you for posting VA’s policy.
Who has time to look up and post the FHA policy about ADU’s???
There you go
Super….thanks for the FHA info…..which says “The appraiser may consider a Manufactured Home to be an ADU if it meets the Highest and Best Use and FHA requirements.”
So there is no size restriction mentioned or bias against a MFH per FHA. However, your local jurisdiction may have a code regarding the size of the ADU in relation to the primary dwelling on the property. Usually, the ADU must be smaller in GLA.
Is it possible to temporarily remove a toilet or stove and have the ADU not be considered an ADU for appraisal purposes since Fannie states the ADU must have bathroom and cooking facilities? We have a property with 2 ADU’s. Fannie only allows 1.
Looking at this as a possible work around.
Were you able to finance/refi with FNMA? We are having a problem refinancing with FNMA because our property has a primary unit and TWO garage apartments (used for extended family quarters).
Great information from all, but my understanding was that and ADU had to be separately metered from the main home, otherwise was considered guest quarters. Does Fannie Mae look at the differences?