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MHC Pro, Paul Bradley, Sounds-Off on New Loan Program for Manufactured Home Owners

October 11th, 2017 No comments

Hi Tony,

Great announcement, huh?  Here’s my take and on-the-record comments:

First, understand that MH in land lease communities in NH is titled as real estate.  Hence, a lender makes a mortgage loan even if they’re financing only the home. Such a mortgage does not include the land and does not disrupt the underlying commercial financing.

Second, Fannie Mae began approving ROCs in 2008 for home only mortgage financing.  Unfortunately, soon after, the PMI companies left the market (due to the recession and problems in the residential mortgage market broadly) so the program languished with just 10 ROCs and two local banks for nearly a decade.

Last week’s announcement brings new life to this program.  The NHHFA will empower its originating lenders to originate residential mortgage loans for homes in ROCs and in turn sell those mortgages to Fannie Mae.  This will make long-term, fixed rate residential loans available on homes in ROCs.  With PMI, borrowers can pull down 95% LTV loans.  It’s how the mortgage market works.

PaulBradleyDutyToServeDTSChattelLendingManufacturedHousingIndustryHomesFannieMaeFHFAIndustryVoicesMHProNews

Editor’s Note: Graphic above and the headline are provided by the publisher, as is common in media. You can download the original article that Paul Bradley is commenting on, from this link here. To learn more about ROC USA, click the graphic above.

Now, two things:

  1. This is the very construct that land lease owners could establish.  In fact, it’s what Freddie Mac went to market with in the mid-2000s with a leasehold loan product that required titling as real estate.  Several states created an “opt in” real estate titling law for MH to take advantage of the program.  And, since, the Uniform Law Commission passed an opt in titling law for states to adopt.  It’s all in waiting.

 

  1. Residential mortgage loans will carry longer terms and lower interest rates than chattel even if the GSEs enter the chattel market with pilots next year.  That’s because mortgage loans are going into existing and very large securities.  Chattel will have a different securitization path.

So, as I’ve said in several industry talks I’ve given on the subject, there are parallels to what we’re doing for industry players interested in providing long-term secure homeownership opportunities.

Further, if a community owner is interested in selling and seeing their legacy continued with innovation like this, they should consider a sale to the residents.  We can help with that and enroll these communities in forward looking, transformative work like this HFA and Fannie Mae financing program.

We’re building a national network on the principle of security for homeowners, and it’s working!  Work for you?

Thanks.

PaulBradleyROCUSA-postedMHProNews-com-75x91-

Paul Bradley
President, ROC USA

Award-Winning MHI Retailer Regarding HUD Objectives, Pam Danner, Needed Changes

March 8th, 2017 No comments

I can’t improve on what Mark Weiss [MHARR President and CEO] has indicated below:

DougGormanICantImproveOnWhatMarkWeissMHARRPresidentCEOHasSaidBelowManufacturedHousingIndustryVoices-MHProNews

Graphic above and the headline were provided by MHProNews, as is customary in publishing. The words in [brackets] were added for clarity, and the text submitted for publication is by the author, Doug Gorman. 

“While MHARR does not claim to speak for the entire industry, we have made it clear that after years of abuse by federal regulators acting contrary to the law and empowering entrenched revenue-driven contractors to target the industry, the new era of regulatory deconstruction being ushered-in by the Trump Administration offers a profound opportunity that must not be missed or squandered.  And while other segments of the industry – following their recent meeting – have not given any public indication of a change in course, direction or approach based on this new reality, MHARR has been on top of this critical matter since the November election, and has already put in place fundamental priorities and policies that I am happy to share with you and the rest of the industry as shown below:

  1. Elevate and include manufactured housing in all HUD (and other federal) housing and housing finance programs on the same terms as other types of housing;
  1. Immediately re-assign the current career HUD manufactured housing program administrator and appoint an appropriately-qualified non-career administrator in accordance with the 2000 reform law who would fully and properly implement that law and any and all regulatory policies and orders put in place by President Trump;
  1. Immediately prepare and issue a new Request for Proposals (RFP) for the HUD program monitoring contract which would provide for, encourage, and ensure full and fair competition for that position, eliminate all “make-work” programs and functions contained in the current contract consistent with Trump Administration regulatory policies and orders, and terminate the existing monitoring contract upon the identification and selection of a new contractor;
  1. Seek the immediate withdrawal of the U.S. Department of Energy (DOE) proposed manufactured housing energy rule pursuant to executive action by either the incoming DOE Secretary, the President, or other appropriate authority and, if necessary, seek a congressional resolution pursuant to the Congressional Review Act to reject any such rule if or when finalized; and
  1. Demand and ensure securitization and secondary market support for manufactured home chattel loans in a significant and timely manner by Fannie Mae and Freddie Mac, so that consumers are not needlessly either excluded from the housing market or unnecessarily forced into higher-cost loans within a less-than-fully-competitive consumer financing market.” ##

Addendum on 1:40 PM 3.10.2017, by Doug Gorman:

I would clarify that Mark Weiss’s language re Pam Danner was that she be reassigned. The original structure of the 21 member Manufactured Housing Consensus Committee  (MHCC) was to have a nonvoting 22nd member. That position was to be a non-career political appointee who would change most likely with each administration. That was the position that Bill Matchneer filled originally as a political appointee reporting to Gary Cunningham at one point. When Gary Cunningham left HUD Bill was promoted to Gary’s career position and the non-career position has never been filled since. Mark’s point was that HUD should structure the manufactured housing program as intended by the 2000 statute. ###

DougGormanHomeMartTulsaOKCreditManufacturedHousingIndustryVoicesCommentaryMHProNews125x125Industry Voices post submitted by Doug Gorman, Home-Mart, Tulsa, OK.  Other guest comments on this or other topics of general industry interest are encouraged and welcome.

 

 

 

(Editor’s Note 1:  Doug Gorman has won several MHI awards as a retailer, and was volunteered hundreds of hours on national issues, served on the Manufactured Housing Consensus Committee (MHCC), etc. Gorman is one of a few individuals who was asked by MHProNews for his thoughts on the needs to replace Pam Danner at HUD, and what MHI’s position on this issue ought to be.  The above was sent by Gorman in response to that inquiry, and was sent for publication.

Editor’s Note 2: There are several Industry Voices posts pending publication, we hope to get caught up in the next week or so.  Please continue to send your thoughts and comments – on or off the record – and be clear what is and is not for attributed publication.  Thank you for your patience.)

 

 

 

 

 

 

Industry Should Stay the Course in Duty to Serve Efforts

February 10th, 2017 1 comment

I appreciate the way that MHAAR respectfully criticized my commentary on the Federal Housing Finance Agency’s (FHFA’s) final rule to implement the “Duty to Serve” (DTS) requirements as being “far too charitable,” but the criticism was misdirected.  My comments neither praised nor denigrated the FHFA for the DTS final rule.

I learned early in my career that you play the hand that you’re dealt.  Sometimes you’re in a strong position and other times you’re not.  The situation dictates your actions and response.

With respect to DTS, the industry was not dealt a strong hand, but I am proud of the way the industry responded.  Because of that, the industry is closer today than at any time in recent years to getting a pilot program for chattel manufactured home loans through the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac.

The FHFA made up its mind a long time ago that it didn’t have the legal authority to require the GSEs to create a secondary market program for chattel manufactured home loans.  Whether this is true or not doesn’t make a difference for all intents and purposes.

JimAyotteFMHAManufacturedHousingIndustryVoicesDutyToServeGSEFHFA-MHProNews

I agree with MHAAR that “If Congress had meant the “Duty to Serve” to be optional, it would not have called it a “Duty.”

But anyone involved with laws and regulations for any length of time understands that laws are not always black and white.  In fact, many times they are not.

For arguments sake, let’s say that the law specifically requires the GSEs to create a loan program for chattel manufactured homes.  Where does that get us? The industry could spend tens or even hundreds of thousands of dollars and years litigating this point.  Even if the industry prevailed, the GSEs would still be in the driver’s seat.  They could create a program that satisfies the legal requirements, but is so safe and sound that it is impractical and unusable.

The only way for the industry to get the GSEs to create a secondary market program for chattel manufactured home loans is to convince them that it is good business and the right thing to do.

This requires a different approach than continually chastising the FHFA for not mandating the GSEs to create a secondary market program for chattel.

MHARR does an excellent job as the industry’s conscience.  MHARR serves an important role in forcefully and articulately weighing-in on every proposal that adversely affects the industry.  But, this is only one element of a strategy, not the whole strategy.  In this situation, a different approach is needed and that approach is to continue doing what we’re doing.

We were all disappointed that it took nine years from the date of enactment of the DTS legislation to get a proposed rule and we were even more disappointed when the proposed rule did not provide “Duty to Serve” credit for chattel loans.  The silver lining was that it was a catalyst for industry members to submit over 3,100 comment letters to the FHFA.  Those letters certainly got the attention of the FHFA and the GSEs.

As a follow-up, the FHFA held an unprecedented public hearing last April to receive input from the industry on how to structure a successful chattel loan program.  The hearing was not to hear testimony on why a chattel program was needed, that fact was already established from the volume of public comments submitted.

The industry’s efforts resulted in a final rule that opened the door a crack by providing the GSEs “Duty to Serve” credit for purchasing manufactured housing loans, but not mandating that they do so.  Considering where we started from in December 2015, the final rule shows the positive impact that an industry can have when its members are engaged and energized.

The FHFA scheduled three “listening sessions” in January and February of this year to take additional testimony from industry stakeholders. This indicates that the FHFA and the GSEs have an interest in exploring the possibility of creating a secondary market for chattel manufactured home loans.

The most important development over the past thirteen months has been the GSEs meeting with industry stakeholders. The meetings started last spring and are continuing today.

The GSEs have shown a genuine interest in understanding today’s chattel housing market. Industry representatives have made a concerted effort to educate the GSEs about chattel manufactured homes and available loan products, and to understand the GSEs concerns, offer suggestions and convey a willingness to be open to new requirements.

From where I sit, all parties are working hard to try to develop a pilot program for chattel manufactured home loans.  I am optimistic that it will become a reality if we continue doing exactly what we’re doing.  ##

jimayottefloridamanufacturedhousingassociationfmha-industryvoices-manufacturedhousingindustrycommentary-mhpronewsJames R. Ayotte, CAE
Executive Director
Florida Manufactured Housing Association
1284 Timberlane Road
Tallahassee, FL  32312

MHARR’s Mark Weiss Reaction to Jim Ayotte’s GSE’s Duty to Serve Commentary

January 24th, 2017 No comments

We at MHARR have the greatest respect for Jim Ayotte, but his recent commentary on the final Duty to Serve (DTS) rule issued by the Federal Housing Finance Agency (FHFA) is far too charitable.

It’s one thing to see the proverbial glass as half full versus half empty.  It’s another to accept a few droplets as half a glass.

And that is what consumers and the industry have gotten from FHFA – a few drops at the bottom of the glass, window dressing that is not likely to lead anywhere soon, despite the urgent need now for affordable and competitive chattel-based consumer financing for manufactured homes.

If Congress had meant the “duty to serve” to be optional, it would not have called it a “duty.”  The dictionary definition of a “duty” has – at its core – a mandatory responsibility.  And Congress is presumed to use words according to their ordinary and customary meaning. But nothing in the FHFA rule would require Fannie Mae or Freddie Mac to do anything to support MH chattel loans – not even a “pilot program” (more about that in a moment).  So the “duty” instituted by FHFA is not really a “duty” at all, but a choice left to entities that have steadfastly refused to provide secondary market support for MH chattel loans – which prompted the “duty to serve” in the first place.

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If all this sounds familiar, it should. It mimics HUD’s “interpretation” of its statutory “responsibility” to appoint a non-career administrator for the federal manufactured housing program as “not mandatory” even though Webster’s says it is.  But HUD (and maybe now FHFA) has gotten away with it because much of the industry plays along.

It’s hard to see, then, how a non-duty which leaves Fannie Mae and Freddie Mac free to ignore the 80% of the manufactured housing market represented by chattel placements (not 70% as reported elsewhere) lives up to the directive of Congress.

While it’s true that FHFA’s final rule leaves the door open just a crack for chattel, rather than slamming it shut as it did in its proposed rules, what does this really do for consumers and an industry that needs competitively-priced and readily-available chattel financing in order to reach its full potential?

DTS was enacted by Congress nine years ago. If either FHFA or the Enterprises were really interested in MH chattel financing, there has been plenty of time to do the groundwork and obtain the necessary loan performance information.  There has even been time for a “pilot program” or two over the last decade.  No, instead, we’re supposed to take it slow, with a non-duty “duty,” while consumers are needlessly herded into higher-cost loans, paying more than they would in a truly competitive financing market not distorted by official discrimination that would be unacceptable in any other context.

With nine years already gone, how much longer will consumers have to wait for the industry to demand full financing parity with other types of housing?  Washington, D.C. is traditionally a graveyard for all kinds of “pilot programs” started with the best of intentions.  Given a “duty” by Congress, the burden is not – and should not – be on the industry and consumers to prove their worthiness. The burden should be on FHFA and the Enterprises to show why they are not complying with the will and word of Congress now. ##

MMarkWeissCEO-MHARR-ManufacturedHousingAssociationforRegulatoryReform-posted-IndustryVoices-MHProNews

By M. Mark Weiss, JD.
President and CEO of the Manufactured Housing Association for Regulatory Reform (MHARR).

(The graphic above and the headline are provided by the editor, as is customary with many publishers. The content expresses the views of the writer.)

FHFA Issues Final Rule on Duty to Serve GSEs Will Receive Credit for Chattel Loans

December 20th, 2016 No comments

On December 13, 2016, the Federal Housing Finance Agency (FHFA) issued a final rule to implement the “Duty to Serve” (DTS) requirements.  The statute requires Fannie Mae and Freddie Mac (the GSEs) to provide leadership to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate income families in three underserved markets.  The underserved markets include: manufactured housing, affordable housing preservation and rural housing.

By way of background, the FHFA issued a proposed rule on December 15, 2015.  The proposed rule provided that Duty to Serve credit would be given to Fannie Mae and Freddie Mac for financing manufactured homes titled as real property, but not manufactured homes titled as chattel.  The agency’s rationale was that real estate loans perform better and have lower default rates than chattel loans.  In anticipation of a firestorm of criticism, the agency invited public comment on whether the final rule should authorize Duty to Serve credit for the purchase of chattel loans.

The industry jumped on this opportunity and submitted over 3,100 comment letters to the FHFA.  Shortly after the issuance of the proposed rule, industry representatives and the GSEs began meeting on an ongoing basis.  Some of the meetings were with organized groups, like the MHI Duty to Serve Task Force, while others were one-on-one with industry stakeholders, including: lenders, community owners and consumer advocates.  From all indications, these meetings were productive and the GSEs gained a better understanding and appreciation for the chattel manufactured housing market.

JamesJimAyotteFloridaManufacturedHousingAssoc-postedIndustryVoices-GSE'sMHProNews-

A variety of viewpoints has been presented on this FHFA final rule topic, some of them, are found from the article linked here.  Other perspectives are welcome.  The full MHARR commentary Jim referenced is linked here.

The final rule provides Fannie Mae and Freddie Mac with Duty to Serve credit for purchasing chattel manufactured housing loans, but does not mandate them to do so.  Whether the final rule is positive or negative for the industry depends on which national industry trade group you listen to.   MHI’s take on the final rule is that it is a step in the right direction.  MHARR believes that because the FHFA did not mandate the GSEs to make chattel loans that it is highly unlikely that any chattel loans will be made.

The truth of the matter is that the industry is closer to getting a viable secondary market program for chattel manufactured home loans than it has been in nearly two decades.  While the industry would have preferred the FHFA to mandate the GSEs to make chattel loans, this was not going to happen.  However, over the past year the GSEs have demonstrated a genuine interest in understanding chattel manufactured housing financing as it exists today, not as it performed in the late 90’s.  If the industry continues to meet with the GSE’s, shares industry operating and loss data, and provides suggestions for properly structuring a chattel loan program, including a flexible approach to loss mitigation, the GSEs will ultimately initiate a secondary market program for chattel manufactured housing loans.  This will not happen overnight and the program will start small, possibly as a “pilot”.  Over time, the program will expand based on the good loan performance of chattel manufactured home loans. ##

jimayottefloridamanufacturedhousingassociationfmha-industryvoices-manufacturedhousingindustrycommentary-mhpronewsJames R. Ayotte, CAE
Executive Director
Florida Manufactured Housing Association
1284 Timberlane Road
Tallahassee, FL  32312

Paul Bradley on the Pending FHFA Final Duty to Serve Rule

December 12th, 2016 No comments

This and Leslie Gooch’s article both push for a chattel pilot in Land Lease Communities; ROC USA is right with them!  Like Gooch, I see the fundamental issue coming down to what we can work out with the GSEs relative to, as she wrote, “reasonable standards for land leases in conjunction with such homes.

We have Fannie Mae financing homes in some of our communities already, but it’s too limited.  We want a chattel pilot and standard land lease so we can scale.  It should reassure skeptics that home-only loans by the GSEs have worked in Land Lease Communities.  We need DTS to get together as a larger market opportunity for the GSEs.

I am surprised that the Community Bankers’ Association (ICBA) would come out against GSE chattel product – from the many community bankers I’ve talked to over the years, the local bankers want a secondary market for chattel.

One of the concerns that lenders often express about manufactured home loans in Land Lease Communities is that homes there lose value.  But that is not a given.  I can point to examples in Land Lease Communities where homes are appreciating.  

ConcernLendersHaveManufacturedHomesLoansLoseValueExamplesHomesAppreciatingPaulBradleyROCUSA-IndustryVoicesManufacturedHousingIndustryVoicesMHProNews

In fact, the two unique elements of this sector – relatively more expensive chattel products and land lease – can be resolved by the GSEs; they could make this market no different than the conventional residential markets where supply, demand, location and upkeep influence house price performance.  The GSEs, with the right lease terms to secure their and homeowners’ interests, could help fix the problem that causes some manufactured homes to lose value. ##

Paul Bradley
President
ROC USA

(Editor’s Note: The National Mortgage News article Paul Bradley is commenting on is linked as a download, here. For an interview with manufactured home owner – Kim Capen, who likewise points to appreciation of manufactured homes in his community – click here.)

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.

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.

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