Manufactured home lender Zippy raises more funds

Zippy, a chattel manufactured housing lender, has raised additional capital from one of its earliest investors, Brand Foundry.

To date, Zippy has raised $26 million in total but it did not reveal how much was obtained in each round.

This financing, which included other undisclosed repeat investors, is in addition to a Series A round funded by FirstBank in February; Crunchbase does not list an amount. An August 2022 venture round raised $15.5 million, Crunchbase said.

"This investment will fuel Zippy's expansion in both sales and engineering capabilities and allow us to expand our footprint across the country," said Jordan Bucy, Zippy co-founder and chief operating officer, in a press release. "We're excited to strengthen our presence and offerings to increase more opportunities for affordable housing as we march toward the immense opportunity in front of us."

Zippy currently operates in 17 states, with plans to operate in more than half the country by the end of 2023.

It is a technology-focused lender. The company offers a digital borrower portal where community home sellers can manage their customer's loan progress in real time. The portal provides loan status updates, document requests, closing updates and digital marketing tools.

Zippy said it provides a similar portal experience for manufactured home buyers but it also offers consumers a loan officer to guide the process from start to finish.

"Zippy is providing an integral part of the equation to increase access to affordable housing by giving homebuyers more competitive financing options," Wesley Gottesman, a partner at Brand Foundry, said in the lender's press release. "We are thrilled to continue to support them in democratizing access to home ownership while pushing the entire manufactured housing industry forward."

Brand Foundry wrote the first check when the two-year-old Zippy was just getting started.

"We're grateful to Wesley Gottesman and the Brand Foundry team for the support and commitment to Zippy's mission from the beginning and betting on our vision and technology," said Ben Halliday, Zippy co-founder and CEO. "None of these achievements would be possible without them (Brand Foundry and repeat investors), our customers, our team and our community operator partners."

Manufactured housing is seen as an affordable alternative in today's market. But financing them can be difficult. This is one area of low-balance mortgage lending that a Pew Charitable Trust report highlighted as a higher cost alternative consumers are forced to turn to. Part of that is related to per loan profitability, not just the lack of secondary market alternatives.

Chattel loans are typically used where the borrower does not own or have a contract to purchase the land where the manufactured home is to be placed. 

While Fannie Mae and Freddie Mac have committed to purchase chattel loans as part of their duty-to-serve plans, they have yet to provide such financing on a large scale.

Last week UMH Properties, a real estate investment trust that owns manufactured housing communities, said it sold 44 new homes in the second quarter for $8.2 million. That is a dollar-volume increase of 17% from $7 million for the second quarter of 2022. It was also above $7.3 million in second quarter sales that Wedbush Securities analyst Jay McCanless was expecting.  

Year-to-date, gross sales totaled $15.5 million from 83 transactions, up 37% from $11.3 million in 2022. The release did not disclose where and what type of financing the buyers obtained.

UMH has over $3 million of manufactured home sales in its pipeline.

The publicly traded REIT raised $45.1 million of common and $15.6 million in preferred equity during the quarter. It also repaid $58 million of maturing mortgages secured by its communities. It does not have any loan maturing in 2024.

McCanless cited financing as one of the risks to his analysis of UMH.

"In most major downturns in the business cycle, we have seen the level of mortgage debt, chattel mortgage financing, and overall liquidity available to the manufactured housing industry cut off by the private market and greatly tightened by the agencies (Fannie, Freddie, and FHA/HUD)," McCanless wrote. "Today, both of the GSEs are looking at how expanded lending to manufactured communities can address their 'duty to serve' obligations."

Furthermore, various policy groups that had been opposed to the sector in general are now "warming to the industry," he continued, putting the analysis "on the right side of a cyclical item, the financing/liquidity equation."

UMH's formal earnings release is scheduled for Aug. 8.