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Foundation for Action as Fannie Mae CEO Put on Notice for Robust Personal Property Manufactured Home Lending

April 17th, 2019 Comments off

 

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Congress, as part of the Housing and Economic Recovery Act of 2008 (HERA), enacted the Duty to Serve Underserved Markets (DTS), a remedial mandate which directs Fannie Mae and Freddie Mac to “develop loan products and flexible underwriting guidelines to facilitate a secondary market for mortgages on manufactured homes for very low, low and moderate-income families.” (See, 12 U.S.C. 4565(a)). In addition, to ensure that the term “mortgages” is not misconstrued to limit the scope of DTS to manufactured home real estate “mortgage” loans, the same section of HERA expressly provides that “in determining whether an Enterprise has complied” with DTS, the Federal Housing Finance Agency (FHFA) “may consider loans secured by both real and personal property.” (I.e., home-only “chattel loans”). (See, 12 U.S.C. 4565(d)(3)).”

 

 

So said Mark Weiss, JD, President and CEO of the Manufactured Housing Association for Regulatory Reform (MHARR) in a letter to Hugh R. Frater, the new Chief Executive Officer (CEO) of Fannie Mae.  As is customary for MHProNews, the quotes from the document shown herein are in bold and brown text, but the phrasing is as in the original, which is linked here as a download.  MHARR’s accompanying press release, is linked below.

 

 

Fannie Mae is one of the Government Sponsored Enterprises (GSEs).  The letter from MHARR to Fannie Mae makes several important points.  But it should also be understood as a possible predicate for other action.  The view from the Daily Business News on MHProNews on this matter is this.  With a FexEx delivered letter, there is arguably reduced ‘plausible deniability’ for a top man at Fannie Mae.

Rephrased, looking at this from a lay view with a legal lens, they appear to be on notice.

But there is more at play here, because there is a broadside shot at the Omaha-Knoxville-Arlington triangle too.

Here is how that is teed up, as MHARR has repeatedly emphasized in DTS implementation comments to FHFA, the Administration, Fannie Mae and Freddie Mac, as well as in congressional testimony, DTS, without market-significant levels of securitization and secondary market support for manufactured home chattel loans, cannot and will not achieve its remedial objectives within the manufactured housing market as mandated by law.”

Weiss’ letter for MHARR goes on to say, that the GSE’s failure “continues to unduly restrict and constrain the market for inherently affordable, non-subsidized manufactured homes (which again, in 2018, failed to reach its historical production benchmark of 100,000 homes per year), while forcing consumers to pay higher-cost interest rates for manufactured home chattel loans due to extremely limited competition and the parallel domination of the manufactured home consumer lending market by a small number of existing lenders, which primarily are subsidiaries of the largest industry conglomerates, such as Berkshire-Hathaway-owned Clayton Homes, Inc. (Clayton).  Fannie Mae obsequiously describes this de facto stranglehold on the manufactured housing consumer lending market as lending that is “somewhat consolidated amongst a small group of prominent chattel lenders.”

 

 

Harm to Consumers and Independent Businesses Caused by Government Sponsored Enterprises

MHARR argues that Fannie Mae – and by inference, Freddie Mac – having failed to follow their Duty to Serve legal mandate harms home owners, prospective buyers, and independent manufactured home industry businesses.

Fannie Mae’s failure to implement DTS in a market-significant manner, with respect to the vast bulk of manufactured home consumer loans, more than ten (10) years after the enactment of that mandate, has caused and continues to cause significant harm to both American consumers of affordable housing and the manufactured housing industry. In particular, this failure has disproportionately impacted – and continues to have its greatest negative impact – on smaller, independent manufactured housing businesses, which, unlike the industry’s largest conglomerates, do not have the luxury or advantage of controlling captive consumer financing subsidiaries or affiliates.”

Readers may recall an applicable quote from Weiss, shown below.

 

MHARRMarkWeissIfCongressHadMeanttheDutytoServeToBeOptionItWouldNotHaveCalledItADutyDefintionofDutyIsMandatoryResponsibilityDailyBusinessNewsMHProNews

 

Meaningless Meetings, the “Illusion of Motion”

The “illusion of motion” is a phrase used from a recent analysis by MHARR that is linked in the quoted phrase above.

It should be noted that Fannie and Freddie are both paying the Manufactured Housing Institute (MHI) to co-sponsor their events.  That raises ethical and conflict of interest questions.  But it also raises questions such as those that follow.

 

  • If MHI has so much clout, as they claim to their members, industry professionals, and prospective members, why is there so little progress toward full DTS implementation?
  • Is Fannie and Freddie paying MHI not to make waves for them, while they slow walk implementation?
  • Cui bono? Who benefits from slow walking the full implementation of DTS?

 

It must be recalled the point that Weiss makes above, namely that the: “extremely limited competition and the parallel domination of the manufactured home consumer lending market by a small number of existing lenders, which primarily are subsidiaries of the largest industry conglomerates, such as Berkshire-Hathaway-owned Clayton Homes, Inc. (Clayton).”

In science, logic, or journalism, one looks at the evidence and applies certain logical ‘tests.’  One of the possible conclusions one can come to is that Fannie, Freddie, MHI and their ‘big boy’ firms have worked to limit lending, to the benefit of Berkshire Hathaway owned finance firms.

By contrast, sources at Credit Human and Triad Financial Services have worked to advance lending by the GSEs, because it would be good for the industry. As a high-level source told MHProNews, it isn’t more profitable for their firm to get the GSEs to do robust chattel and other lending on all manufactured homes, not just the openly Clayton-backed ‘new class of homes.’

Rephrased, it would be misleading to say that everyone in MHI is essentially slow-walking or foiling GSE lending.  There are those working for ‘big boy’ companies that privately oppose the alleged rigging of the system against the interests of consumers and independent companies.

Time will tell what Fannie Mae – or for that matter, Freddie Mac – will do.  We have sources with ties to MHI that say that they expect some modest personal property or chattel lending activity sometime this summer.  But what MHARR is pushing for – as are some others in MHVille – is market significant lending.

The higher rates are often the focus of attacks on the industry by groups such as MHAction, or in that viral video by John Oliver misnamed “Mobile Homes” are often linked back to the lack of lending options that keep rates lower.

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Note that MHProNews continues to periodically reach out to the GSEs or the Omaha-Knoxville-Arlington axis leaders or spokespeople to correct or confirm concerns like those raised.  They’ve maintained their constitutional right to remain silent, which is to be respected, but that also leaves these concerns unchallenged to serious researchers and thinkers.

 

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Manufactured Housing – Investors Taking Notice?

April 21st, 2017 Comments off
ManufacturedHousingInvestorsTakingNoticecreditNAREIT-postedtothedailybusinessnewsmhpronewsmhlivingnews

Credit: NAREIT.

While the value proposition for manufactured housing is well known to industry professionals, showing or explaining that value to the mainstream can be a challenge.

According to recent information from NAREIT, that appears to be changing.

New data shows that manufactured housing REITs now occupy an enviable place in real estate, combining a dearth of new supply with a heavy demand for affordable housing options.

Approximately ten new manufactured home communities have been built in the United States in the past two decades, an eye-popping anomaly among real estate sectors,” said Ryan Burke, an analyst at Green Street Advisors.

Aging baby boomers are driving demand at age-restricted communities, while all-age communities are popular with younger families looking for affordable housing options. Nowhere else in real estate do we see this complete lack of new supply and the favorable demand dynamics. It’s a pretty good story.”

R.W. Baird analyst Drew Babin agrees.

Manufactured housing REITs and existing owners of manufactured housing communities currently have a chokehold on the market,” said Babin.

While it may seem that the favorable metrics would be lost in the shuffle with investors, that isn’t the case. In 2016, manufactured housing REITs delivered returns of 28.5 percent, beating out apartment REITs by nearly ten percent, and single-family home REITs by nearly 14 percent.

ManufacturedHousingInvestorsTakingNoticecreditGreenStreet-RyanBurke-postedtothedailybusinessnewsmhpronewsmhlivingnews

Ryan Burke. Credit: Green Street Advisors.

As manufactured housing continues to outperform other sectors, particularly in the private market at the property level, there’s no way the outperformance will go unnoticed,” said Burke, who also addressed some of the challenges to entering the market.

Among the barriers to entering the manufactured housing market are the communities’ long lease-up periods. It can take more than five years to reach a stabilized occupancy level. It’s tough for a developer to be able to underwrite that lease-up period,” said Burke.

Other market analysts predict acquisitions in the space will be “episodic.” According to Green Street, manufactured housing REITs own about 1 percent of the estimated 50,000 manufactured housing communities in the U.S., but nearly 15 percent of the institutional-quality stock. (It should be noted that some MHC experts put the total number of communities at about 45,000 nationally).

With new supply largely non-existent, analysts believe that REITs will try to grow their portfolios through acquisitions, and through expanding existing sites. An example cited was Sun Communities 2016 acquisition of Carefree Communities Inc., for $1.7 billion.

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Credit: Sun Communities.

And, while there may be more “whale” sized acquisitions – like Carefree communities – available in the market, Burke says that he sees smaller deals on the horizon – at the right price.

Most of the manufactured housing parks [sic] are held by smaller investors that own up to three properties,” said Burke.

They hesitate to sell for several reasons: they make a good living from the properties; they would be hit with high taxes if they sold; and many sellers would be unsure how to reinvest the proceeds to achieve similar yields. There’s a whole lot of demand for these properties across the board from REITs and institutional investors and very few properties coming to market relative to other property types.”

Overall, analysts agree that manufactured housing REITs have strong growth potential, including the ability to expand existing sites where they own, or can acquire, additional land.

They’ve been very aggressive about doing that because it’s so hard to find entitled land. Oftentimes the best land is on their existing properties,” said Babin.

Some Mega Deals in Recent Years

The linked stories above are among several that involve Carlyle Group, UMH Properties, ELS and other private or public portfolio operators, often involving one hundred million to a billion dollars plus packages.

Does holding the number of new communities being created down impact the market?  Of course.  Does the time to fill a community – due to image or regulatory reasons – impact the market?  Again, yes.

Moguls Understand Value

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Credit: MHLivingNews.

The Daily Business NewsMHProNews and MHLivingNews have covered the case for manufactured housing as a viable solution to hope for the American Dream of home ownership at a reasonable price extensively, including Bloomberg making a statement to the same effect.

The ability to significantly cut down on production time, provide a high quality product to federal standards, all at a lower price point serves as the ideal solution to inventory and housing challenges. The titans of business recognize the opportunity as well, as giants and independents alike are actually “doubling down” on the industry.

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Sam Zell, ELS Chair, credit, MHProNews.

ELS Chairman Sam Zell has been famously quoted as correcting misconceptions about the industry, saying during this interview, “Everyone calls them trailer parks. Pencil head, it’s not a trailer park.

For more on manufactured housing being the solution that’s hiding in plain sight, see MHProNews and MHLivingNews Publisher L.A. “Tony” Kovach’s insight into the opportunity linked here. ##

 

(Image credits are as shown above, and when provided by third parties, are shared under fair use guidelines.)

 

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RC Williams, for Daily Business News, MHProNews.

Submitted by RC Williams to the Daily Business News for MHProNews.

Bad Actor? MHC Residents Given 48 Hours Notice to Vacate

February 6th, 2017 Comments off
BadActorMHCResidentsGiven48HoursNoticetoVacatecreditTriStateUpdate2-postedtothedailybusinessnewsmhpronewsmhlivingnews

A home at Caroline Estates Mobile Home Park. Credit: Tri State Update.

A visit to a manufactured home community in Chapmanville, West Virginia, by the Logan County Health Department quickly turned into a crisis.

Community landlord George Evans told residents of the Caroline Estates Mobile Home Park on January 29th that they needed to be out of the community by January 31st because the Health Department found issues with electrical hook-ups and other health violations.

According to Tri State Update, this put community residents into a panic, with many saying they had no place to go.

I didn’t know what I was going to do. I mean I’ve got two kids. My son had trouble at school yesterday just thinking about all of this,” said Joda Farley, who has lived in the community for 7 years.

That was the situation when I moved in the place and he knew that. I had no place to go and I needed a place to live so there it is,” said resident Greg Williams.

BadActorMHCResidentsGiven48HoursNoticetoVacatecreditGoogle-postedtothedailybusinessnewsmhpronewsmhlivingnews

Chapmanville, West Virginia. Credit: Google.

While the violations may have come to a surprise to residents, Evans appears to have known about them all along.

Inquiries to the Logan County Health Department uncovered that issues at the community had been going on for years, and a health inspector confirmed that after dozens of violations that Evans’ license to own and operate a manufactured home community was revoked on January 1st.

Residents at the community said that Evans collected rent in early January, even though he was aware of his license being revoked.

BadActorMHCResidentsGiven48HoursNoticetoVacatecreditTriStateUpdate-postedtothedailybusinessnewsmhpronewsmhlivingnews

Resident Greg Williams in front of his home. Credit: Tri State Update.

You have all of these violations that need to be corrected, why not let us know and lets correct them? Instead you wait until you have 10 families set out? It’s not right,” said Williams.

Joda Farley owns her home. Without a place to move it, she’s taking a “wait and see” approach to what to do next.

It is the only thing I can do. I don’t have a place or the means to try to move it. I mean I just have to ride it out and see how far it goes,” said Fairley.

Per Tri State Update, as of January 31st, all residents living in the community had not moved out yet and some are in the process of finding other places to live, and Evans has not returned calls for comment. Inquires from the Daily Business News have not received responses as of the time of this article. ##

 

(Image credits are as shown above.)

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RC Williams, for Daily Business News, MHProNews.

Submitted by RC Williams to the Daily Business News for MHProNews.