Archive

Archive for the ‘Finance’ Category

Dare’s 3 Point Plan for Manufactured Housing Industry Recovery

June 29th, 2016 No comments

TitusDareSVPEagleOneFinancial-PostedIndustryVoicesMHProNews-com-With apologies to MH Industry legend Randy Rowe and his 5 Point Plan for Industry Recovery – which is insightful and important reading – let me

suggest that what the Industry needs is a foundation that’s built upon a simple three point plan – which is really a 1 point plan – and everything else is a subset to that basic necessity.

Ready?

Education, Education, Education

James McGee and Chet Murphree said it very well on a video, its all about education. That’s sounds so simple, but they were correct, and its so true.

What keeps more lenders from entering the manufactured housing market? Education.

What does and has Triad Financial done so successfully for years to bring more lenders into the manufactured housing space? In a phrase, they’ve educated bankers and credit unions to the realities of modern manufactured homes.

The Three Forms of Education needed for MH Industry Recovery are these:

1) Public Education

Consumers must be exposed – educated – about the product.

This can happen at events, online, at a retail center, community, factory, visiting a friend’s manufactured home, etc. The more the public is educated, the better they understand our product and the more they will buy it.

The secret sauce for manufactured housing success is to attract and sell more credit worthy buyers, which in turn will cause the stigma to subside. As more millionaires and the mid-to-upper middle class buyers purchase a new manufactured or modular home, the more success the industry will enjoy in selling the entry level market that no one but manufactured housing can successfully serve without serious public subsidies.

EducationIsAKeyToProfitablyAdvanceManufacturedHousing-TitusDare-imagecredit-MHProNews-com

Editor’s note – All images on this page, save Titus’ photo, are provided by MHProNews.com as illustrations for his message, and were not sent by the author.

2) Outside MH Professional Education

Want More Lenders? Be it the GSEs, or others, education – not a sales job, education is at the heart of what’s needed. Educate them on how the existing industry lenders do it successfully. Do what Don Glisson’s team has done, or what I’ve been a part of doing in MH for many years.

Some 80% of HUD Code MH sales make appraisal, so 20% of potential sales don’t meet appraisal.

Want more appraisers to give better appraisals on manufactured homes? Then, you better help them get their arms around the nuances between the upper end homes and the entry level homes, underscoring the point that they are all built to the HUD Code and are safe, durable and energy efficient. Educate them!

Want more public officials to say yes to manufactured housing? Educating the public, and creating their demand for the product – while also educating local, state and national officials – educating each of those groups are essential. Each must be educated uniquely, but each form of outreach should take place at the same time.

Want more developers, Realtors ® and other housing professionals to embrace manufactured homes? Isn’t that also about education?

Make no mistake about it – the industry has to reach out to a myriad of other groups and professionals if it is to achieve its potential. But the rewards will be worth the effort.

Inside MH Professional Education

To sell more of the upscale buyers, and to convince more public officials, mainstream media etc. – all of those are educational efforts, that requires better motivated, informed and yes – educated industry professionals.

Some in the industry are truly forward looking. Others are hoping for a return to Conseco and Greentree days. The later won’t happen and wouldn’t work for long if it did.

For the Industry to attract new capital, we must prove we are educated enough ourselves to be thinking about ways so that everyone in the mix will benefit and win.

The win-lose days are over.

Further, you don’t usually sell a millionaire the same way you do that customer who can just barely qualify for the least expensive entry level house. You have to approach every prospect based upon their unique needs, wants, world view and expectations.

All of that and more are a matter of training, of education.

What Won’t Work

What’s clear is that manufactured housing endured over a decade of downturn, followed by a modest roughly 6 years of recovery.

We may have the best product ever, but what attracted those new lenders in the past and what attracted developers and other housing professionals to MH before was what appeared to be the opportunity to do volume and to do it in a profitable way.

MH was once one out of every 4 new homes hooked up to electrical service in the U.S. Today, its a fraction of that total.

We can’t tilt at windmills, we can’t cry over split milk, but we can learn our lessons. That learning…is education! So we can begin to educate our way back to success.

4S=SafeSoundSanitarySustainable-postedIndustryVoicesMHProNews-com-

In case you missed it, click the link above to see Titus’ original column on MHProNews.

Every step of what it takes to be successful in lending, which is critical for the advancement of this or any other big ticket industry, must be connected to those 4S I mentioned in my first column.

The news is breaking as I’m writing this today that YES! Communities is being pursued on a 2 billion dollar potential buyout. Whatever happens on that deal, we know that several billions in MHC transactions have already taken place in the last year. That tells us what we already know.

Manufactured housing has demand, because affordable housing has demand.

What did Frank Rolfe say on that video? People hate their apartments. Rolfe and his associates are growing because they understand a key aspect of affordable housing. Price and payment sells!

Exaggerating to make the Point

In truth, education, education, education is a key.

But there are subsets to that, where experts in lending, in developing, in production of HUD Code and modular homes, in proper installations, in safe transit, insuring, supplying, associations, legal minds and other experts all play a role. So I’m exaggerating education a bit to make the point.

Over the years, at educational events I was part of to promote manufactured housing lending and manufactured housing as the ideal source for affordable housing for potentially millions of people, I had the opportunity to meet all sorts of Industry pros.

I’ve mentioned Don Glisson Jr. and Rick Rand, but there was also the Claytons, Dan Rolfes, Lad Dawson, Marty Lavin, Dick Ernst, Phil Surles, Joe Stegemeyer and so many others I could fill this page with their names. Each one brought certain qualities to the table.

That’s what must happen again – bring together the best minds, to educate – and education is the best form of promotion that manufactured housing could possible offer for the future.

Is there more to do than educate?

You bet, and with Tony okay to publish it, I’ll gladly share that in a future column too. Let’s note that Tony and his team and sponsors have already started this educational ball rolling on MHLivingNews – educating the public and public officials, and on MHProNews by sharing the insights, interviews, comments, news and opinions that so many have on these pages over the years.

End the Fear, and the Growth Will Follow

One piece of the advancement puzzle is ending fear. Education overcomes the paralysis of fear, or the no that fears cause. State or national associations clearly have many potential roles to play.

Come on in the water is fine” won’t work when trying to get the FHFA, GSEs or anyone else to come to the manufactured housing table on doing long term chattle-style (home only) mortgage lending.

As a career banker and a true believer that MH can, and will, solve our housing crisis in America, I ask each member of this great industry to pull together and refocus the efforts of the industry on education, education, education for the next 3 to 5 years. I believe the results for the MH industry and all those involved will be astounding. ##

(Editor’s note – the headline was written by MHProNews, the contents of this message were sent to us by the author; we note that so that readers don’t get the impression that Titus Dare named himself in the headline! 😉

TitusDareSVPEagleOneFinancial-PostedIndustryVoicesMHProNews-com-By Titus Dare
Senior Vice-President
EagleOne Financial, Inc.

40th Anniversary of Manufactured Housing Reflections – HUD’s Forty Years of Wasted Opportunity

June 13th, 2016 No comments

MMarkWeissCEO-MHARR-ManufacturedHousingAssociationforRegulatoryReform-posted-IndustryVoices-MHProNewsIn a 2015 address, HUD Secretary Julian Castro had glowing words for manufactured housing. Calling HUD the “Department of Opportunity,” the Secretary spoke of manufactured homes as a “vital solution” to the nation’s “affordable housing crisis.” In reality, though, HUD and the federal manufactured housing program have spent the last forty years – since the inception of the federal program in 1976 — wasting opportunities (or worse) when it comes to manufactured housing. While documenting all these wasted opportunities would take an entire book, some recent examples from the post-Manufactured Housing Improvement Act of 2000-era will illustrate the point.

The Secretary’s flowery prose regarding the “vital” role of manufactured housing — a role ironically ignored by HUD in its last two departmental strategic plans, where it actually counts – stands in sharp contrast with objective evidence of the Department’s actual perspective on HUD Code homes and the role of the federal program. Like the illusionist’s “shiny object,” used to distract an audience, political pronouncements are a diversion. Instead, the truth – and its real world consequences – are to be found in the concrete actions of program officials and, occasionally, in “under the radar” HUD documents, which provide a less guarded insight into the institutional mindset that underlies and drives those actions.

ManufacturedHousingReflectionsFromHUDLeadershipGraphic-creditHUD-postedIndustryinFocus-MHProNews-

One such HUD document has just been published. Entitled “Manufactured Housing: Reflections from HUD Leadership – A HUD 50th Anniversary Publication” (MH Reflections), it offers a simultaneously revealing and disturbing glimpse into the pathology of a misdirected and mismanaged HUD program that violates its governing law — to the benefit of industry competitors (site-builders, Realtors ®, the rental housing industry, etc.) and the detriment of the HUD Code industry and its consumers — every day.

The HUD manufactured housing program can – and should be — a model of successful collaboration; an example of what an effective partnership between federal and state governments, consumers and private industry can do to help lower and moderate-income Americans (who might otherwise be excluded from the housing market altogether) achieve the American Dream of home ownership and all of its benefits. As MHARR emphasized in its October 26, 2015 documented testimony to the House Financial Services Committee on “Innovative Approaches to Address Housing Affordability:” “By providing inherently affordable home ownership for individuals and families, rather than a form of direct or indirect government ‘assistance,’ or residence in publicly-owned housing, manufactured homes … offer the ‘individuality, the human dignity, the respect for individual rights [and] devotion to individual responsibility’ that President [Lyndon] Johnson envisioned at the signing ceremony for the legislation that created HUD” fifty years ago.

And, for sure, the need for decent, affordable home ownership in the United States has never been greater. Census Bureau data shows that the rate of home ownership in the United States fell to a 20-year low in 2014. At the same time, a February 2015 HUD “Worst Case Housing Needs” report found that nearly eight million lower-income American households in 2013 either “paid more than half their monthly incomes for rent, [or] lived in severely substandard housing, or both,” nearly 50% higher than in 2003.

These wretched statistics — along with the unprecedented contraction in industry production since the turn of the century — only make more damning the failure of the HUD manufactured housing program (ironically excused, supported, or even enabled by part of the industry) to carry out a fundamental element of the mission assigned to it by Congress in the Manufactured Housing Improvement Act of 2000.

The HUD program, with authority over the nation’s most affordable housing, should be playing a dynamic role in facilitating the availability of affordable manufactured homes for consumers and the acceptance of manufactured housing for all purposes within HUD as commanded by the 2000 reform law. With those twin “facilitation” directives, the 2000 law (a unique law passed by Congress unanimously) fundamentally altered the one-dimensional focus of the original 1974 federal law. As congressional proponents of the 2000 reform law put it in a 2003 letter to HUD, “the 2000 Act … transformed the [1974] Act from solely being a consumer protection law to also being an affordable housing law.”

To look at the actions of current program officials, however, and read the “reflections” of post-2000 program “leaders,” one would think that the 2000 law – with its broader focus on advancing manufactured housing — had never been adopted. The entire focus of the HUD program — after four decades – remains on more and more needless regulation, with more and more competition and market-killing regulatory compliance costs (which disproportionately impact smaller industry businesses), even though by all available objective metrics, the consumer safety element of the program has already been fully achieved.

Put differently, nearly two decades after the 2000 reform law, the HUD program and its “leaders” are stuck in a “time warp” where nothing has changed in decades. How else to explain the fact that nearly every “reflection” in HUD’s MH Reflections, involves increased and expanded regulation, with not one word about: (1) actions that HUD is taking (or could take) to advance manufactured housing as an affordable housing solution; or (2) how smaller industry businesses in particular are being strangled by layers of baseless new regulation that undermines their ability to compete, to enter or remain in new emerging markets, or even place homes in large swaths of the country, while HUD is either complicit or stands by and does nothing?

In case after case, the HUD program — and particularly its current Administrator — have either benefitted industry competitors (site-builders, realtors and the rental housing industry) by restricting the HUD Code industry’s ability to compete effectively, or have unduly harmed smaller industry businesses which cannot amortize constantly increasing regulatory compliance costs over a much larger base of production. And there are plenty of examples to illustrate this.

Like the new HUD “on-site” rule that will add millions in needless new bureaucratic costs while undermining a process meant to simplify Alternate Construction and enhance the industry’s ability to compete with other homes in an important emerging market. Ignoring unanimous calls from all program stakeholders (prompted by MHARR) to delay implementation of the rule for 12 months while the MHCC re-examines its requirements and costs, the program Administrator presses forward. “Facilitation?” Hardly.

Like energy regulation. In MH Reflections, program leaders note that manufactured homes are “now … more energy efficient,” a fact confirmed by Census Bureau data showing manufactured home energy costs either lower than or comparable to site-built homes. But what has HUD done to stop the U.S. Department of Energy from singling-out manufactured homes and manufactured homebuyers for crushing energy standards (strongly opposed by MHARR, but supported and advanced by MHI) that will far exceed standards imposed on million-dollar site-built homes and devastate the HUD Code market? In a word, nothing.

Like fire sprinklers. The “leaders” profiled in MH Reflections rightly emphasize improvements in the “fire safety” of manufactured homes. And again, data from the National Fire Protection Association shows that HUD Code homes, in the key categories of fire occurrence, injuries and deaths are either safer than – or comparable to – site-built homes. But what has HUD done to put to rest constant calls for drastic fire sprinkler mandates? Again, nothing, while it currently works to include in the HUD Code – for the first time – a supposedly “voluntary” sprinkler standard (strongly opposed by MHARR, but proposed and advanced by MHI).

Like wind resistance, anchoring and installation. All have been significantly upgraded as correctly observed in HUD’s MH Reflections. But what has HUD done to stop the baseless, discriminatory exclusion of HUD Code homes from jurisdictions around the country (rationalized by myths surrounding these issues) – as the industry and American consumers of affordable housing suffer – when it has all the power and authority, as well as the express statutory mission to do so (as fully explained in two recent “MHARR Viewpoint” columns)?

Like advancing the availability of financing and ensuring the establishment of a federal secondary market and securitization support for manufactured homebuyers as mandated by law. Chattel financing under the Federal Housing Administration (FHA) Title I program has fallen to insignificant levels as GNMA excludes finance companies under its unduly restrictive 10-10 rule. Both FHA and GNMA are HUD agencies. What has HUD done to change the devastating status quo? Nothing. Meanwhile, the Federal Housing Finance Administration (FHFA) — still lacking a final Duty to Serve” (DTS) implementation rule — for the second time in five years has proposed a blanket exclusion of manufactured home chattel loans from DTS (strongly opposed by MHARR, but the subject of closed “mystery meetings” between MHI and FHFA officials). The response from HUD in two open rulemakings? Zero.

And these are just some of the more recent examples of the failures of Washington, D.C. regulators. Many more could be cited. But the point is clear. Congress has given HUD a mandate concerning manufactured housing – in an outstanding, well-thought-out law — that HUD (with the tacit or active support of part of the industry) ignores every day. Consumers and smaller industry businesses suffer the consequences. Larger businesses, shielded by billion-dollar corporate mega-empires, at best, don’t care.

In MHARR’s view, HUD has already wasted 40 years-worth of opportunities to help American consumers achieve the goal of affordable home ownership. And decades of “go-along-to-get-along” have accomplished nothing. Instead, industry businesses and members that care should get behind MHARR’s aggressive agenda to change the direction of this crucial – but “off-the-tracks” program. ##

M-MarkWeiss-MHARRPresident-ManufacturedHousingAssociationRegulatoryReform-posted-MHProNews-com-75x75-By M. Mark Weiss, JD, President and CEO of MHARR – the Manufactured Housing Association for Regulatory Reform.

This article first appeared in the Journal, and is reprinted here with permission and the written request and consent of MHARR. The links and downloads in the above were editorially added to make referencing the various points in Weiss article easier for readers and researchers, as was the first few words in the headline: 40th Anniversary of Manufactured Housing Reflections.

A Deeper Look at why the GSEs say no to Securitizing Chattel Loans

May 24th, 2016 1 comment

TOPIC

The Duty to Serve (DTS) question for the Government Sponsored Enterprises (GSEs) of Fannie Mae and Freddie Mac regarding originating Chattel (home only, personal property) loans on HUD Code Manufactured Housing has been a topic of discussion for years.

FreddieMacFannieMae-logos-creditBeforeItsNews-PostedMHProNews-

Logos are for editorial illustration purposes only, and are the properties of their respective organizations. Composite image credit, BeforeItsNews.

BACKGROUND

To understand why I say what I do about DTS, the GSEs, MHI and manufactured housing (MH) below, some history will be useful. My experience with MH Affordable Housing and Duty-to-Serve spans nearly 35 years.

Upon entering the mortgage banking business, I worked in the mortgage division for Fleet Bank in St. Louis, Missouri. I made my first HUD Code MH land/home loan back in 1982.

At that time, HUD Regional Offices had to approve each subdivision and the homes that were being constructed within that community. HUD reviewed, approved and retained documentation and complete control of the Architectural & Engineering process.

The Regional HUD Office was located in St. Louis and Chaired by Joy Miller. Fleet was chosen by HUD because of its strong government lending (FHA & VA) platform, national presence with the ability to replicate the program. Fleet provided financing for the consumer’s purchasing HUD Code, single-sectional and multi-sectional, Redman Homes on short wall foundations in a subdivision in House Springs, Missouri. This was a new MH “beta test” community development project. It was one of the first HUD Code MH subdivisions outside of California. It was cutting edge and an exciting step for me right out of college.

At the time, I had no idea that my future in banking would be focused around Affordable Housing. From that point forward, I continued down the path of Affordable Housing which is truly a key for the to Duty-to-Serve.

In my follow-up assignment, I worked extensively at Ft. Leonard Wood, Missouri making over 600 VA loans in two years to accommodate relocating veterans and civil service personnel in the initial phases of the US Military Base Realignment and Closure (BRAC) program. Specifically, on the Ft. Belvoir, Virginia relocation of 2400 families to Ft. Leonard Wood over six years. Brick & mortar site built homes were selling for $35,000-$65,000.

Next stop was in 1995 when I was invited to join an exclusive group of high profile mortgage bankers who focused on Affordable Housing nationally. I had no idea when I was chosen that I was chosen for my HUD Code MH housing experience. The group of 30 members from around the country formed the Underwriting Barriers Outreach Group (UnBOG), lead by Rick Coffman and Matt Miller of Freddie Mac in Washington, DC.

The task force was formed to bring mortgage bankers together to discuss how to create loan programs to provide financing for the underserved, economically or geographically challenged consumers. These borrowers were credit worthy, but did not have down payment of 10% or 20% plus closing costs. Or they could not meet the debt-to-income ratios of 28/36. They needed expanded guideline programs. As a member of that task force, I helped craft the 97% LTV Alt-A, Section 8 Voucher-to-Own, Lease-Purchase and the 105% LTV loan programs.

During that time period, our government leaders on Capitol Hill put mandates on the GSE’s to produce and deliver Affordable Housing programs to the marketplace. The new mandates were tremendously difficult to meet. They were tied to creating and driving home ownership in the United States. The new mandates required that 1 out of every 2 mortgages purchased by Fannie Mae or Freddie Mac had to meet strict affordable underwriting criteria to be considered affordable.

The reason for the formation of the UnBOG group and the push to new loan programs as outlined above to expand homeownership, thus simultaneously answering the DTS mandate at the same time. It was from the UnBOG platform I learned how to write loan programs and how they were developed to serve a diverse and unique new classification of purchasers referred to in those days as “low-mod” borrowers.

In essence, our leaders on Capitol Hill were enforcing the Duty-to-Serve component which had been the focus of the creation of Fannie Mae and Freddie Mac from their inception. Nothing new, just a way to measure and enforce the GSE’s mission of Duty-to-Serve and expand homeownership.

FAST FORWARD

My invitation to UnBOG was to provide insight into the Manufactured Housing space. Specifically, how to create and deliver the MH product from construction loan through permanent end out loan on a product built in an off-site factory versus the traditional on-site method.

By this time, I had already successfully been making construction-to-perm loans on MH for 13 years. The GSE’s felt that a look into the MH industry, what I was doing and how I was doing it, could help them achieve these lofty Duty-to-Serve Affordable Housing goals now being enforced from Capitol Hill.

This point is that Duty-to-Serve is nothing new. It truly is the reason Fannie and Freddie were created.

For the first couple of years, we focused on Fee Simple loans known in the industry as Land/Home loans. Many of the programs coming through the development pipeline at the GSE’s were inclusive of MH Land/Home financing. Land/Home was sort of a no brainer, but subject to several gaps that needed to be closed with regard to title insurance, retiring titles, mortgage insurance, production and travel insurance, method of attachment and the creation of a true real property package upon completion and conversation to the permanent-end-out mortgage. Those topics we can save for another article.

In 1998, while working for First Tennessee Banks mortgage banking division, which would later become First Horizon Mortgage, I received a call from Freddie Mac asking me if I was interested in working on a new loan program crafted by a captain of the MH land lease community at MHI, a gentleman named Rick Rand. Rick had worked with program development guru Ginger Walters and Freddie Mac attorney Judith Agard to craft a program to serve as the Chattel Loan look-a-like.

The program was designed around a 35-year land lease, which created the real property entity necessary and required by the GSE’s to make a 30 year fixed rate loans on MH HUD Coded homes sited in MHC’s.

It was a brilliant piece of work by all parties, but there wasn’t anyone in the mortgage or banking space interested in the $300MM beta test “pilot program” that 99.99% of bankers had no clue about. It just so happened that I had extensive leasehold estate background from years gone by.

So when I received the call from Rick Coffman from Freddie Mac, my UnBOG colleague, I understood the program immediately.

Needless to saym it was exactly what the GSE’s needed to kill two birds with one stone. First and foremost, it met the Affordable Housing criteria right out of the box for Community Reinvestment Act (CRA) credit. Which meant it could be counted towards the GSE’s requirement to expand homeownership. Second, it answered the DTS question that had been long on the lips of all MHI leaders, pushing for rates and terms more readily associated with brick & mortar housing.

For me, it was just another niche market program that I was going to have to run up the flagpole with my boss, his boss, his boss and so on until I got to the banks president who just happened to understand the program.

Why, you ask did the president of a large bank like First Tennessee get it?

Well, because it just so happened our largest client on the books at the bank was this fellow name Jim Clayton, and his company was called Clayton Homes. You know  – the gent who sold his manufacturing, retailing and MHC communities to the “Oracle of Omaha”, aka Warren Buffet.

There was a program which we launch at First Horizon where we worked out the kinks in origination, processing, underwriting, closing, funding and servicing and – oh, yes – securitization too. Because Fannie and Freddie had their securitization platforms built out years before this “real property” leasehold estate program arrived on the scene.

By the way…pricing was about a ½% above the then 30 year fixed rate pricing.

The program was strong and grew legs. We even added a One-Time-Close (OTC) Construction Loan to the menu as First Horizon was developing Construction-To-Permanent (CTP) and OTC loans at that time.

We then moved it to First Bank where it died on the vine, as it became tainted by those who thought we could utilize this program the same way the other Chattel programs were being used in the marketplace in that GreenSeco era of “No Income, No Asset, No Job, No Money,” no problem loans. The GSEs wanted none of the headaches that came from the mindset that spawned GreenTree, Conseco and the other related chattel lending meltdowns of the late 1990s, and the early 2000s.

MHImanufacturedHousingInstituteLogo-postedIndustryVoicesMHProNews-

The MHI logo is used here for illustrative purposes only, and is the property of that trade association.

WHAT’S THE POINT?

For years MHI has been attacking the DTS issue in hopes of pushing through some sort of chattel lending conduit for as long as I can remember. The Duty to Serve has been on the books since the inception of both GSEs.

The DTS guideline for both GSEs – Fannie Mae and Freddie Mac – in their view is clearly stated to be for real estate secured properties. Chattel loans by definition are not real estate, and most folks in the MH world don’t understand the cost to build the securitization process.

The roots of the issue from the GSE vantage point are several key components.

First, understand that neither of the GSEs have the platform to securitize and deliver chattel product into the market place. There is already a pipeline to buy/deliver loans on conventional housing, but there is nothing like that for the personal property lending space that manufactured housing operates in.

If the GSEs were to spend the millions and millions of dollars to build that secondary market, there was in the past insufficient product flow to support the expense.

Another prime example is that the major purchasers of GSE securities paper are not interested in buying chattel (home only, personal property) loan production.

Those investors, such as Goldman, BlackRock and Raymond James among a host of other institutional buyers of mortgage paper do not have a DTS requirement. They are a behind-the -scenes cause for the “Just say No” by the GSEs on MH chattle lending, not the GSE’s themselves.

The GSEs only buy what they can securitize and layoff out their back door to their institutional buyers. If the institutional players don’t want the paper, who else is there to purchase those MH chattel loans in volume?

It is MHI’s lack of understanding of the function the GSEs have in providing paper to their core secondary lenders, such as Wells Fargo, Bank of America (BOA) and U.S. Bank.

What causes a great part of this problem is the MH industry’s failure to create a program that delivers a standardized product. For example, when the GSE’s buy a loan from Wells or BOA, the home created is attached to the land through a standardized “method of attachment.” That’s commonly called a “foundation.”

The house is built for a slab or a stem wall foundation that attaches a given residence to the dirt creating a single package of “real estate.” Home, foundation (which again is standardized) are connected to the land, thus creating a single package of real property. That standardization allows the title insurance companies and private mortgage insurance companies to stand behind those loan products too.

Chattel loans on manufactured homes are seen by the GSEs as a hodgepodge of various foundation systems. Mock block in their view is nothing more than a faux exterior wall that doesn’t attach the home to the ground. They see MH as concrete blocks on plastic pads, tied down with cork screw anchors, metal straps and then commonly enclosed by using vinyl skirting.

In the eyes of the folks that buy all the securities from the GSEs, those aren’t true foundations, they don’t believe they’ll stand the test of time, i.e. the 30-year term of a mortgage. Thus, the home – and loan – in their view won’t perform.

This is in spite of the fact that there are thousands upon thousands of successful examples of manufactured homes that have stood the test of time on these foundations.

In a phrase, this is a perceptual issue that calls for insights and education.

But have you ever sat across the table from six “black box” investment bankers and actuaries from Goldman Sachs or Pieper Jaffery and tried to explain to PhD. so-and-so from Harvard, and Phd. so and so from MIT or Yale and argue such topics? Doubtful. But I have. And I must tell you it is exhausting and has often seemed to be wasted time.

One such academic who actually had a hand in creating the securitization business called me aside halfway through one such meeting and said “Titus, let me give you a bit of information from our perspective.” “Yes, sir” I said, all ears. “If it walks like a duck, quacks like a duck guess what? It’s a duck” …meeting adjourned.

In addition to the manufactured home foundation issue – right or wrong – the security buyers still view these homes as ones that can be moved to another location in the middle of the night.

The MH industry fails time and again to realize the GSEs are a conduit to the secondary market buyers.

The GSEs create “real property” securities that are sold into the marketplace. The GSEs don’t even have to service loans. They have four major servicers behind the curtain that can service loans, if necessary, on behalf of the folks who purchase the securities.

The Triad Financial Services and Clayton/Vanderbilt Mortgage and Finance chattel models are different yet similar, as they finance chattel loans that are either held in portfolio or sold at a discount to a note rate buyer looking for yield spread.

The Clayton/VMF model is successful because Mr. Buffet has deep pockets and likes the yield spread. Not to mention Jim Clayton had the brains and financial support to create it. And at their company owned retail centers, VMF only finances paper from Clayton dealers. Plus, Mr. Buffet owns Clayton manufacturing and many of its suppliers as well as its dealer base. He is thus able to finance low credit with higher down payments or he can finance 5% down for consumers with truly good credit scores.

Triad focuses on AAA grade paper from reputable dealers that have a strong track record with Triad’s independent MH retail base. They portfolio and service their loans in house. Don Glisson, Jr. and his team have done a terrific job of navigating the chattel waters for over 30 – sometimes tumultuous – years. Triad’s book of business is the testimony to Don’s success.

If the MH Chattel industry would produce a standardized product model, with a more traditional method of attachment, and pushed the model without deviation through a beta channel and proved that compliance, not circumvention is the new MH mantra, then they would have a secondary market delivery strategy.

Armed with such data, you can then approach the investment banking crowd with proof of your models success. But instead, every time there is a lack of lenders or funding in the MH market, MHI cycles back to the GSE’s and DTS.

But there are powers that be in the good ole boy MH world who won’t learn and/or capitulate to those realities. As was noted in the Masthead blog linked here, the GSEs – as well as FHFA and most importantly our U.S. Congress – will not budge on this issue.

By the way, some of those House and Senate members will upon retirement want to go to work for the GSEs, or with the institutional actors such as Goldman Sachs or BlackRock. So they aren’t going to do much if anything in defense of chattel lending if it causes heartburn for those they may go to work for later in life.

4S=SafeSoundSanitarySustainable-postedIndustryVoicesMHProNews-com-

The answer…is easy…follow in the footsteps of Jim Clayton, Don Glisson, Jr., and Warren Buffet and create a standardized program that delivers a product that can stand the test of time and contain the 4 S’s: Safe, Sound, Sanitary and Sustainable.

But the MH industry, year after year after year, fails to produce anything that the true secondary market is likely to hang their hats on. ##

TitusDareSVPEagleOneFinancial-PostedIndustryVoicesMHProNews-com-Titus Dare
Senior Vice-President
EagleOne Financial, Inc.

 

 

Editor’s Note: Other well reasoned letters to the edtior Op-Ed style viewpoints are encouraged on this or other MH topics.

The Government Cosigning for the American Dream

May 23rd, 2016 No comments

ron-thomas-sr-rona-homes-founder-mmhf=louisville-show-chairman-posted=mhpronews-com-50x50-Since the end of WWII millions of Americans have achieved the American Dream with the US Government co-signing for their house loans until 2005. The banks never did buy a score below 650, but with the government co-signing for the loan the banks bought the deal. These buyers often lived in their home 20-30 years. They purchased it for $75,000 and sold it for $150,000. With their equity, a small savings and Social Security they could retire. Not so today!

The banks still do not purchase deals below 650 credit score, the government quit co-signing and so millions are forced to rent. Some rentals are taxpayer subsidized. There are millions of apartments being built. The people are paying $800-$3,000 a month in rent. There is almost no way they can save up a 20% down payment. Many are thus doomed to renting and can never achieve the American Dream.

With the govenment out of the picture, it has opened the doors for entities to charge exorbitant interest rates of up to 18% to purchase a home. This is not unlike prohibition. When the goverment quits, the void is filled by people from the dark side.

95% of these people are paying rent each month instead of a house payment. Most have always made their payments. Fannie and Freddie are still throwing off millions in profits. It works!!

The land and all the improvement cost is equal to 50%-60% of the cost of the home. In our manufactured home community, we lease the land, permits and improvements for about $300 mo. That’s is a phenomenon!!
TheManufacturedHomeIndustryTooGoodToBeTrueItsAPhenomenon!RonThomasSr-MHProNews-

There is nothing these people can look forward to because the gov’t has failed to help them and because of that they are condemning millions of Americans to stay down on the plantation and never achieve their American Dream.

I am in the Manufactured Home Industry. I call my industry a phenomenon. Here’s why – “It’s too good to be true.” That’s a phenomenon.

Never before in the history of the world has a country been able to give their people a home for 1 to 2 years annual income. That’s a phenomenon.

If we had FHA, Fannie and Freddie co-signing for loans in a land-lease, it would look like this; Banks could get 150-200 basis points over a real estate loan. This would currently equate to about a 6% chattel loan. This is a premium for banks of 50%. These consumers could purchase a $70,000, 1500 square foot manufactured home with 3 bedrooms 2 bathrooms with 3-5% down, 15 year loan at approx. $550 per month (depending on the market, that should cover PITI). They could put their home in a manufactured home community for approx. $300 monthly site lease, for a total home payment of $850 per month. Their debt would not exceed roughly $67,000. They would benefit with interest tax credit to lower their cost even more and pay off their home in 15 years.

TheGovernmentMustCoSign-ThereIsNoOtherWayToMoveEconomyForward-RonThomasSr-MMHFChairRonHomesFounder-MHProNews-

The country has been hitting on 4 of 8 cylinders. The reason is the 800 lb. gorilla is not in the game. We all know the impact the housing market has on the economy. Getting all the industries supporting the housing industry could easily get to 6, 7 or 8 cylinders fired up. There is no other way. The stock market is not going to go a lot higher, the auto industry is maxed out, so there is no other way to move the economy in a meaningful way. ##

RonThomasSrMMHFChairmanRonaHomesFounder-PostedIndustryVoices-MHProNews-Ronald A. Thomas
MMHF Chairman
Rona Homes founder

Editor’s Note: A video interview with Ron Thomas Sr. is linked here. Other perspectives on the finance or other MH related issues are encouraged.

The Importance and Value of Independent MH Trade Publications

November 24th, 2015 No comments

MHProNews.com and MHLivingNews.com are both good communications resources for the Manufactured Housing Industry. I and many others at 21st Mortgage and at MHI logon to see the latest news, interviews, debates, videos, opinions and reports they publish. Having a trade publisher that presents thoughtful, respectful commentary independent of any association’s perspective – as important as an association’s view can be – can be a big asset to advancing the MH Industry’s cause. Let me explain why.

There are times that publisher L. A. ‘Tony’ Kovach – or a writer or interviewed person on one of his trade media sites – will take a view different than that of a given association.  

Respectfully and thoughtfully done, that can lead to a healthy discussion. Such discussions are how industry members can learn from each other and grow.  We may agree or disagree, but a quality, candid and respectful discussion that clarifies issues has true value.

When MHI or another association finds Tony or one of his guest writer’s taking a view clearly supportive of an Industry association’s stated position, that should bring more confidence to all; precisely because they share an independent viewpoint. 

A “yes man” has limited value, while the thoughtful agreement or discussion from a variety of engaged players is all-the-more compelling and powerful.

At 21st Mortgage, we have access to a wide variety of resources that the independent business or professional in MH may lack. While anyone can gain value from their industry trade publications, independent business owners can gain valuable insight from the industry news, tips and views found on MHProNews and MHLivingNews.com. 

Tony is routinely at MHI meetings, and attends the briefings and sessions. He is engaged. When he says he supports HR 650/S 682, he walks the walk in word and deed. He has clearly supported the earlier versions of the bill and commented as such in his publications.

TimWilliamsMHProNewsMHLivingNewsGoodCommunicationsResourcesILogonLatestNewsBigAssetExplainWhyIndustryVoices

We all make mistakes. I know that Tony has corrected errors when they are brought to his attention. His publication accepts opinion articles or will share views in interviews that may differ from his own published position. My impression is that Tony isn’t looking for ‘an amen corner,’ rather, he wants a variety of views that get people to think, talk and take action. 

At times, MHI presents messages in ways differing or emphasizing one point over another than Tony’s publications. For example, Tony acknowledges that due to CFPB regulations, there is an impact on MH lending at $75,000, and states as much in videos and articles. On this we agree. He tells me his emphasis of the impact to MH on homes below $20,000 is because of feedback he gets from home sellers. While we are choosing to focus on two different segments of our borrowers, the overall message is still the same.  To rephrase, Tony’s publications and MHI are both correct on this issue. There is no daylight, just a difference in delivery.

I’m happy to commend Tony and his team members for the important work they do to advocate for our MH industry. Perhaps one of the more useful points that can be made about their value is that others in the mainstream media and in government have cited Tony, MHProNews.com and MHLivingNews.com, and/or have shared his pro-industry take on a wide range of MH related subjects. They’ve done positive and profitable work promoting the MH industry, events, products and services.

We hope his team continues their years of efforts to provide a balanced and useful source of info on MH. Their growth and success are good news for our MH Industry. ##

tim-williams-CEO-President-21st-mortgage-corporation-currentManufacturedHousingInstituteChairman-IndustryVoices-manufactured-housing-mhpronews-Tim Williams
President/CEO 21st Mortgage Corp.
MHI Chairman.

2012 Election Results and Coming Lame Duck Session

November 9th, 2012 No comments

MHI logo posted in MHProNewsWhile commentators will be picking over the remains of the 2012 elections for weeks to come and discussing what the political landscape will look like over the coming year and what impact the elections will have as Congress prepares to return for a lame-duck session, MHI wanted to provide members with some feedback and analysis of the immediate aftermath and outlook for the coming weeks.

While votes in Florida are still being tabulated, President Barak Obama successfully won 303 electoral votes and secured a second term as President. By winning nearly every key swing state including Colorado, Ohio, Virginia and Wisconsin, Obama was able to successfully hold off Governor Mitt Romney’s challenge. It is expected that once the count is finalized, Obama will also garner Florida’s 29 electoral votes. Given Democratic gains in the House and Senate, it is not widely anticipated that Obama will seek to strike a conciliatory mood with Republicans on fiscal issues, or on issues related to a softening of Dodd-Frank.

An even more dramatic surprise was the performance of Democrats in U.S. Senate races. While defending 33 Senate seats this cycle, Democrats were widely predicted to loose (up to) a total of four seats in that chamber. Instead, Democrats we able to successfully win two additional seats and will expand on their current majority during the 113th Congress to 55:45 (Ds:Rs). Included in these were victories by key manufactured housing industry supporters Sen. Sherrod Brown (D-OH) and current Rep. Joe Donnelly (D-IN). Rep. Donnelly successfully won the Senate seat in Indiana being vacated by Sen. Richard Lugar (R-IN).

Republicans are still firmly in control of the House of Representatives. While a number of House races are still being decided, current tallies peg a net Democratic gain of five seats—far short of the 25 needed by Democrats to regain control of the House.

Looking forward, Congress is tentatively scheduled to return November 14 and work up until the Thanksgiving holiday. The House and Senate would then reconvene in December to complete work in time to adjourn prior to the Holidays. Issues expected to dominate the lame duck session, include:

  • · FY 2013 appropriations
  • · Extension of 2001 and 2003 tax cuts
  • · Sequestration
  • · Increase of debt ceiling

During the lame duck session, MHI will be working to pass legislation (H.R. 3849 and S. 3484) reforming portions of the Dodd-Frank and SAFE Acts. The session could potentially offer opportunities to attach portions of these bills to larger measures moving through each chamber. During this time, MHI members a strongly urged to continue contacting their members of Congress to request they co-sponsor either H.R. 3849 or S. 3484. For more information, access the MHI action alert at www.mfghome.org.

JasonBoehlertManufacturedHousingInstituteSeniorVPLogoMHIlogoQuoteMHProNews

Editor’s Note, this graphic was added on 11.28.2017, by the editor of MHProNews. The content, and the original email that delivered it, are the same as shown.

For your reference, we have attached the following analysis performed by MHI external consultants summarizing the impacts and outcomes of the 2012 election:

  • Porterfield & Lowenthal: overview of the impact the 2012 election will have on banking and financial services issues, including an outlook for the 113th Congress.
  • SNR Denton: Broad and in-depth analysis of the 2012 Presidential election, including overview of House, Senate, Gubernatorial elections and ballot initiatives.

In addition, we have included a win-loss summary of candidates the MHI-PAC contributed to during the 2012 election cycle. In total, the MHI-PAC distributed in excess of $126,000 to support 59 federal candidates. Of those candidates running in 2012 (excluding retiring members and Senators not currently in cycle), the MHI-PAC boasted a win percentage of 93 percent.

jason-boehlert-mhi-VicePresidentManufacturedHousingInstituteMHILogoManufactuired-Housing-pro=news-by Jason Boehlert
Manufactured Housing Institute (MHI)
Vice President of Government Affairs