Diversification is one of the most important elements of a solid loan portfolio. But even though diversification has a significant impact on portfolio performance, it is the asset quality that determines the overall return. Consequently, opting for high-quality, high-yield lending programs is key to increasing the rate of return, while minimizing risk.
Though manufactured home financing has excellent growth and return potential, it remains one of the least explored asset classes. Now, let’s analyze the top five reasons why financial institutions like community banks and credit unions should consider enhancing their portfolios with manufactured home financing programs.
Reason #1: It provides a safe investment opportunity.
Currently, the lenders that make available manufactured home loans have strict eligibility requirements. Since qualification requirements relate to loan performance, Triad Financial Services only lends to prime borrowers with an average FICO score of 700+.
Reason #2: Manufactured home financing can help build a lucrative portfolio.
The more assets a financial institution adds to its portfolio, the more stable its portfolio becomes. By spreading investments across different loan programs, including manufactured home financing, you can better address market volatility and make your loan portfolio less vulnerable to large swings that may negatively affect specific market segments.
Conversely, a financial institution whose loans are heavily concentrated in certain asset classes are more likely to experience a massive drop as a result of several poorly performing loan products.
Reason #3: Manufactured home lending is a highly regulated industry sector.
Although the manufactured home financing guidelines can vary widely from lender to lender, manufactured home loans are subject to a series of regulations that protect both the lenders and borrowers.
While specialized government agencies, like the CFPB, protect borrowers, lenders are protected as well by a series of rules and regulations. For example, manufactured home loans are backed by the homes themselves, which serve as collateral. As with many other loans, if a borrower defaults on a manufactured home loan, the lender can seize the collateral to recoup its losses.
Reason #4: It can help you expand your market reach.
Enhancing your loan portfolio with manufactured home loans will enable you to attract new borrowers and expand into a new lending market that would otherwise be closed to you.
Although loan portfolio diversification doesn’t guarantee that your institution will achieve better returns in a short period of time, it can increase your overall loan origination volume. This will eventually result in a higher ROI.
Reason #5: It allows you to maintain a highly profitable portfolio.
Here, we’re not necessarily referring to the benefits of adding manufactured home financing to your loan portfolio but to the resources manufactured home lenders provide in order to help credit unions and small banks make the most of their diversification strategies.
An example is our manufactured home loan programs, which bring along efficient loan processing, satisfied borrowers, higher close rates and many cross-selling opportunities. What’s more, a partnership with Triad Financial Services ensures that your manufactured home financing program isn’t only profitable but also compliant with industry standards.
In the world of investing, there is no such thing as risk-free investments. However, manufactured home financing is definitely worth careful consideration. That’s because finding new investment opportunities that can deliver a decent positive return can help a financial institution stay afloat in today’s increasingly competitive lending environment.