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Dodd-Frank Congressional Hearing – Lost Opportunity?

June 20th, 2011 No comments

Dear Doug, George and Tony:

Because of your keen interest in this issue, We thought that you might be interested in the below Press Release regarding a June 16, 2011 congressional hearing on the “Impact of Dodd-Frank Regulations on Jobs and U.S Competitiveness.” The hearing, according to the Release, is a reflection of “widespread and growing concern that the Dodd-Frank Act with its 400 new regulations will lead to industry capital and jobs leaving the United States.”

Given the fact, as Doug so correctly pointed out in his recent open letter to CFED’s Kathryn Goulding, that Dodd-Frank, “without alteration will … eliminate the availability to finance [manufactured housing] loans lower than $78,000” when the HUD Code market averages $60,000, we were wondering whether anyone submitted, at the very least, written testimony for this hearing on behalf of the industry’s finance companies, retailers and communities? If not, that failure, in itself, illustrates the need for a separate national post-production industry association…and if yes, it should have been widely circulated for further publicity and a second bite of the apple with other members of Congress and Washington officials.

While it is true that the focus of the in-person testimony at this particular hearing related more to international regulatory disparities, the fact remains that given the potential damage that Dodd-Frank regulation could do to the industry, with its corresponding impacts on economy, jobs and competitiveness in the heartland of the United States, this matter (i.e., elimination of a whole class of affordable housing for moderate and lower income American families) should be highlighted and new markers established with Congress and other officials in Washington at every step, such as this hearing. The post-production sector and its national representative, need to be taking advantage of every conceivable opportunity and every possible forum (particularly a direct Dodd-Frank hearing, like this) to expose the plight of the industry and its consumers, and the need for a remedy from Congress. Needless to say MHARR fully supports any such action.

Thanks,

Danny

Danny D. Ghorbani
President
Manufactured Housing Association for Regulatory Reform
1331 Pennsylvania Ave. N.W. Suite 508
Washington, D.C. 20004
Phone: 202/783-4087
Fax: 202/783-4075
Email: DANNYGHORBANI@AOL.COM


Financial Services Committee of the U.S. House of Representatives

Press Release
Financial Services Committee to Examine Impact of Dodd-Frank Regulations on Jobs and U.S. Competitiveness
WASHINGTON — The Financial Services Committee will examine the international implications of the Dodd-Frank Act on U.S. economic competitiveness during a hearing on Thursday.

“There is a widespread and growing concern that the Dodd-Frank Act with its 400 new regulations will lead to industry, capital and jobs leaving the United States. This is a concern that many of us on the Committee have expressed repeatedly,” said Chairman Spencer Bachus. “Our hearing will examine the regulatory disparities between the U.S. and other nations and how that could put American companies at a competitive disadvantage and harm our economy.”

The Committee will specifically look at four crucial areas where divergent regulatory approaches taken by the United States and the rest of the world could damage the U.S. economy and the ability of financial institutions to compete against their foreign counterparts: capital and liquidity requirements; regulation and oversight of “systemically important financial institutions”; derivatives requirements; and a total ban on proprietary trading.

The hearing, titled “Financial Regulatory Reform: The International Context,” will begin at 10 a.m. on Thursday, June 16 in room 2128 of the Rayburn House Office Building.

This will be a two-panel hearing with the following witnesses:
Panel I
Sheila C. Bair, Chairman of the Federal Deposit Insurance Corporation
Lael Brainard, Under Secretary of the Treasury for International Affairs
Gary Gensler, Chairman of the Commodity Futures Trading Commission
Mary Schapiro, Chairman of the Securities and Exchange Commission
Daniel K. Tarullo, Governor, Board of Governors of the Federal Reserve System
John Walsh, Acting Comptroller of the Currency, Office of the Comptroller of the Currency
Panel II
Stephen O’Connor, Managing Director, Morgan Stanley, and Chairman, International Swaps and Derivatives Association
Timothy Ryan, President & CEO of the Securities Industry and Financial Markets Association
Hal S. Scott, Nomura Professor and Director of the Program on International Financial Systems, Harvard Law School
Barry L. Zubrow, Executive Vice President and Chief Risk Officer, JPMorgan Chase & Co.
Damon A. Silvers, Associate General Counsel, American Federation of Labor and Congress of Industrial Organizations

Perceptions

June 12th, 2011 No comments

I was getting ready to catch a flight today, and someone shared an article that was in “The Journal” about the 2011 MHI Congress and Expo.  Written by Frank Rolfe, he stated among other things that ”he didn’t see anything remotely resembling optimism at the event.”  He also went on to state that “the plumbing fixtures show – which attracts 40,000 that same week in Vegas – is free;” “change the event to spanning a weekend, not on weekdays.  An event that’s Saturday and Sunday would allow more people from outside to attend” and “I think everyone at the show was carrying an AARP card.”

The title of the article is “Were We All at the Same Show in Vegas?”, and I was wondering the same thing after I read his article.  Everyone is entitled to their own opinion, but what was different about our opinions and experiences is that I spent a lot of time listening – OK, maybe even eavesdropping – and videotaped over three hours of interviews and presentations made during the show.  What I captured on film are people’s perceptions of Expo and the industry.  After viewing and reviewing what I saw, heard and have witnessed since, I’d like to share my perception of Expo and our industry.

1.  Quality not Quantity.  I’ve been attending and speaking at the MHI Congress and Expo since the 90’s.  Is the show as big as it was then, and are as many people attending?  No.  But what is different now is the quality of the participants and the exhibitors.  Where else, in two or three days can you have conversations with the leaders and CEO’s of almost every top 10 manufacturer as well as the smaller but innovative leaders in our industry?  I like the intimate size that Congress is right now, but I know it’s not always going to stay this small and I’m taking advantage of the opportunity to get to have conversations with people that I might have never met before.

One of my favorite experiences this year was getting to chat with Jim Clayton about his book.  I got the copy when he was a keynote speaker at Congress last year, and it made me love him and Clayton Homes even more.  For me, that was a priceless, very special experience.

2.  Optimism. I not only saw and heard optimism, I saw enthusiasm about our future.  And this wasn’t just “talk.”  Look at how Cavco has grown, and they are profitable while doing it!  I’ve visited the Champion Homes of Texas and SE of Texas plants recently, and the proof that things are getting better is that the plants are open, busy, and there are homes consistently coming down the lines.  I’ve also heard that we are running out of existing inventory homes – a great problem to have.

3.  Age of Life, Stage of Life.  I’ve always preached it’s not how old you are, but how old you feel.  One of my favorite experiences was getting to reach in and draw the winner of the iPad drawing sponsored by iCafe.  The winner may have had an AARP card, but I have a feeling he could dance me under the table any night.  He understood technology, Skyped with his grandkids, and was attending with his son who is also in the business.  I noticed that during the NCC seminars, almost everyone in my row had an iPhone, Smart Phone and/ or an iPad.  I thought (and the photos back me up) that this year’s Congress had a much younger crowd, something I’m really excited about.  We have some really exciting changes coming, and some great talent coming up through the ranks.

 

 

A company that I’m really excited about is Basic Components (BCI Inc).  They just celebrated their 25th anniversary.  Russ Chappell is sharing the reins of the company with his two sons, and I am blown away with the direction they are heading in and the products they are offering.  You need to ask them if you want to know anything more 🙂  Another great example is Thayer Long – Executive Vice President of MHI.  I’d never ask his age, but to me he’s a “youngster” that has really turned MHI around, and is changing people’s perceptions of MHI and the Factory Built Housing industry.  A great example is that after attending and exhibiting at Congress, Champion has re-joined MHI.  I doubt they’d be a part of an organization they didn’t believe in and see value in.

 

 

4.  Other Conventions.  I attend a lot of conventions and conferences, and had the opportunity to attend the plumbing fixtures show (actually KBIS – Kitchen Bath Industry Show) that Mr. Rolfe referenced in his article.  It was a ghost town, and what usually takes me at least two days to go thru, took me only three hours.  Kitchen & Bath Design News stated in a Feb. 2011 article that at that time, they had 5,867 registered attendees and 457 exhibitors as opposed to 44,154 attendees and more than 1,000 exhibitors in 2007 – the last year the show was held in Vegas.  I was the Lifestylist® for the New American Home – the official show home for the International Builders Show (IBS) in Orlando this year, and their attendance was around 1/2 of what it had been in the past.  Mr. Rolfe also stated that admission to KBIS is free – not necessarily true.  You can visit the exhibits for free, but full registration including the seminars is comparable to Congress.  The same is true at IBS: visiting the exhibit floor is free, but the rest costs about the same (except for the $5.00 coffee and $4.00 water at IBS).  Making it free to visit the exhibits is fine, but will it bring customers or just lookers?  With all that Congress offers, you really can’t compare it to the other shows because including the awards and luncheon, keynote, seminars, and all of the wonderful meals they feed us truly sets it apart.

I am on the Design Council for Thermador Appliances, and they have stopped exhibiting at KBIS and IBS because they have chosen to focus on their customers and potential customers in a more intimate setting, where they can give them their undivided attention.  To me, this is exactly what Congress offers – instead of 1,000’s of people looking for free pens and bottle openers, you get the decision makers who are truly interested in what you do, and you are afforded the time to have a real discussion with them.  Plus, one of the things that Congress offers that I think is brilliant is offering food and drinks in the exhibit area.   Food is expensive in Vegas, and having the opportunity to enjoy some great food while spending time with others in my industry is a great service.  I discovered some great products and services I wasn’t aware of at this year’s Expo, and I plan on doing business with them.

 

 

Lastly, I think Thayer Long, Ann Parman and the other tireless members of the MHI team should be congratulated for putting on a first class event.  It’s an event I won’t miss, and some of my favorite times and stories have happened in Vegas.  But you know what they say – What Happens in Vegas Stays in Vegas…  unless you ask.  I would love to share my experiences – you can view some of my interviews at: www.lifestylist.tv and on my YouTube channel at: www.youtube.com/lifestylist.  Because business has been so good, I’ve been too busy to get all of them up – there will be more to come.  If you have a positive story about the industry, please share it with me at: answers@lifestylist.com – let’s share why “Now’s The Time To Buy” a new factory built home!

Photos by Lisa Stewart – Lisa Stewart Photography # #

Suzanne Felber, Lifestylist®, 214-941-8341, or email answers@lifestylist.com

Factory-built “Housing Built in Alabama for Alabama Citizens”

June 10th, 2011 No comments

Those are the words of Sherry Norris, Executive Director of the Alabama Manufactured Housing Association (AMHA), commenting on the new modular apartments rising in downtown Montgomery, Alabama.  As we reported in the Daily Industry Business News Blog on May 27, the two city blocks where dilapidated housing once stood are not far from the governor’s mansion.

MHMSM has learned from sources involved that Heritage View Apartments is a collaborative project of a handful of entities.  This modular venture is a first for several of them.

 

Heritage View Modular Apartments

 

Southern Energy Homes (SE Homes, NASDAQ:SEHI)of Addison, Alabama, a subsidiary of Clayton Homes, is constructing the 66 modules for the apartments.  Michael Wade, Director of Manufacturing for Cavalier Homes, a subsidiary of SE Homes, and Project Manager for this project, said, “There are two city blocks designated for this project, and there will be 11 three-story modular apartment buildings, and each building will have five dwelling units for a total of 55 apartments.  Two of them are three-bedroom apartments, and three of them are two-bedroom apartments.  This is the Addison plant’s first multi-story modular project.”

SE Homes has been in business since 1982, and has been building modular homes since the late 1980’s.  Even though their primary focus remains in the manufactured housing market, “in the last two years, modular construction has grown tremendously percentage wise,” Wade added.

 

A modular unit is set in place.

 

Wade said,” Construction of the modules will take about three and a half weeks.  We should have 70 percent of the boxes [modules] set by the end of June.”  He anticipates the units will be ready for occupancy in the fall.

The contractor for the apartments, Empire Construction, of Knoxville, Tennessee, laid the foundation, and will build the staircases, balconies, porch attachments, sidewalks, parking lots, and complete the landscaping.

Read the complete illustrated report at http://www.mhmarketingsalesmanagement.com/industry-news/industry-in-focus/1694-factory-built-housing-built-in-alabama-for-alabama-citizens

Photos courtesy of the Alabama Manufactured Housing Association  # #

Matthew J. Silver
Industry in Focus Reporter, MHMSM.com
Matthew@MHMSM.com
317.840.0803

Update on “FEMA In-Community Housing Relief”

June 10th, 2011 No comments

Editor’s Note: Spencer Roane is keeping us updated on the task force behind using manufactured homes as a part of post-tornado solutions to housing.

Tony and Catherine,

Here’s a note which we sent to FEMA, GEMA (Georgia counterpart), and various others with whom we hope to work on the idea of using vacant land lease community sites for disaster relief. It may also serve as an update for your readers.

From the time of David Roden’s first report here on May 7 – Manufactured Homes Could Be Part of Post-Tornado Solution in Georgia – our task force has continued to pursue the use of manufactured housing as an option in disaster situations. We are currently working to schedule a meeting of the Georgia Disaster Housing Task Force to explore issues of common interest. In the meantime, allow me to identify the players in this effort at this juncture:

The Georgia Manufactured Housing Association (GMHA) represents the interests of all segments of manufactured housing in Georgia, including manufacturers, transporters, retailers, communities, lenders and suppliers. Jay Hamilton is our executive director. He is new to the position, but has extensive experience in the industry. His office phone is 770-955-4522. David Roden is a community owner (CO) and active member of GMHA. Steve Case and Spencer Roane are also community owners who serve as community representatives on the GMHA board.

Our national organization is Manufactured Housing Institute (MHI) in Washington, DC. Thayer Long is president. MHI formed a task force to work with FEMA on the design of MHs for disaster relief and to advance the concept of placing disaster relief homes in land lease communities (LLCs, aka mobile home parks). Lois Starkey is the primary contact at MHI for this program. Spencer serves as one of several community owners on the MHI task force. Several members of that task force attended the “Industry Day” Seminar with FEMA personnel in Washington DC on June 7. We will learn more about that meeting next week.

David volunteered in the cleanup effort after the April tornadoes struck Georgia and Alabama and subsequently proposed that MHs be located on vacant lots in LLCs for use by disaster victims. Since then he and Spencer have been exploring that concept with MHI, GMHA, FEMA, GEMA, and community owners across the country. Several relatively recent developments in our industry have come together to make this more feasible than ever:

• Most LLCs have 5-15% vacancy rates, mainly as a result of the economic slowdown and the same finance meltdown that affected conventional housing. “Best guess” at this point is that there are about 200,000 vacant LLC lots across the country.
• As COs have sought to fill vacant lots with new MHs, many manufacturers have begun building “Community Series” homes (CSHs). George Allen and Don Westphal have worked closely with Business Development Managers (BDMs) with most manufacturers to develop this concept. These are generally lower priced, single-section, usually 16’ wide by 70-80’ long, 3 Br 2 Ba, vinyl sided, shingle roof, with attractive exterior and interior features. INSERT PHOTOS OF TWO CSH HOMES. The cost of these attractive, functional homes is about $25,000, delivered to the LLC. Setup, utility connections, A/C, skirting, and decks add about $10,000 more to the cost.

 

Community Series Home 1

 

Community Series Home 2

 

• To provide quick and efficient support to disaster victims, a database of available home sites which are in close proximity to a disaster is a necessity. Several alternatives exist in Georgia and elsewhere:
• The Community Attributes System (CAS) was developed as a joint effort between MHI and Datacomp, which also owns the Internet marketing site “MH Village.” Dan Rinzema is president of Datacomp. Although the database contains approximately 40,000 land lease communities (LLCs) across the country, much of the information is outdated. The website is www.mhicas.org.
• We just learned of another database which serves Georgia and 29 other states. The Georgia service is Georgia Housing Search.Org.  We understand that it currently contains about 170,000 rental listings, including manufactured homes, LLC lots, site-built houses, and apartments, and experiences 8,000 – 9,000 searches per day for available rentals. The parent non-profit organization is www.socialserve.com. The services are apparently funded by state or federal agencies and are free to landlords and prospective tenants. We’re still collecting information on both.
• Some real estate brokers and agents who specialize in LLCs have surveyed many LLCs in states in which they broker properties. Max Baker, a GMHA member and agent with Marcus & Millichap, recently compiled a database of about 900 LLCs in Georgia ranging in size from a few lots to about 500. We know there are others elsewhere with similar LLC data who are willing to participate in this disaster housing relief effort.

Since CSH homes are compatible with other homes in LLCs, COs would be glad to have them moved into their LLCs for disaster relief, provided the CO screens the new resident as he/she would any other resident. Also, since COs want homes to remain in the LLC, they would be willing to purchase the MH after FEMA/GEMA use. This would seem to be an efficient, cost-effective “exit strategy” for FEMA since the homes would not have to be moved to a storage facility, rehabbed, and stored for the next emergency.

We welcome the opportunity to work with GEMA, FEMA and others to implement this program. We are planning a meeting of about 100 COs in the Atlanta area in mid-October and would be glad to have someone from GEMA and/or FEMA discuss this program at that meeting. We also encourage FEMA to contact George Allen who holds an annual meeting (Roundtable) of COs across the country in mid-September. This year’s meeting will be in San Antonio, Texas. It would be an excellent means of publicizing this program on a national basis. # #

David Roden, davidroden@yahoo.com, 423-760-4819
Spencer Roane, spencer@roane.com, cell ph. 678-428-0212

Open Letter to CFED regarding Dodd-Frank and its impact on affordable Manufactured Housing

May 24th, 2011 No comments

To: Kathryn Gwatkin Goulding
Cc: CFED Federal Policy

Kathryn,

I am receipt of CFED’s newsletter earlier today in which praises were heaped upon the Dodd-Frank Bill and its related Consumer Financial Protection Bureau. Analysis of the bill by numerous manufactured housing industry financial services consultants have concluded that without modifications, this bill could destroy our industry which is currently only hanging on by a thread anyway.

The Dodd-Frank Bill is far too typical of Congress’ meddling with our system with devastating effects on lower income families. While boasting about protection for consumers, the results of the bill without alteration will be to eliminate the availability to finance home loans lower than $78,000. Since our loans average about $60,000, more than half of our market will be eliminated. Those unable to get loans will be the ones at the lower portion of our client base. I don’t think these wanted Congress to legislate them out of the ability to purchase a home. Rather than promoting the infallibility of the Dodd-Frank Bill, CFED should be rallying to support the changes needed to protect the lowest income home purchasers in our nation. Just because they are low income, they should not be forced out of the ability to purchase a home. As I assume you are aware, our industry is already at the lowest level of shipments since record keeping began in 1961. Unmodified, the Dodd-Frank Bill will most likely destroy any hope for a recovery. The sad thing is that the death of the industry will not result from the Free Enterprise rejection by the market; it will be the result of an ignorant Congress legislating low income consumers out of the ability to borrow the funds necessary to finance their home. Of course, Congress did the same thing to the US light bulb manufacturers so maybe we should have seen it coming.

Please note the comments below in a column written by industry expert and Industry Person of the Year, George Allen. Please join our industry to encourage Congress to make the modifications necessary to preserve the ability of our lowest income homeowners to achieve their goal of homeownership. I appreciate the efforts CFED has taken over the years to protect low income families. Removing their ability to purchase a home will not be to their benefit.

George Allen–
Dodd-Frank Fallout. Geesh! This bill isn’t even law yet, and finance-related businesses are closing, simply to avoid having to put up with the more onerous of its proposed/planned regulations. Already, ‘former employees,’ perhaps even potential borrowers, are paying the price for what, to many of us, appears to be excessive regulatory reach into the financial sector. Here’s the plaint of one blog flogger (i.e., reader) writing to us this past week…
‘Dodd-Frank forced us to close our mortgage company in ___________ , and lay off several employees. Reason? Our capitalization with _______________ (a major bank) as our JV partner, was slightly in excess of $1,000,000. We were not a broker, but a direct lender, using the bank’s money. Under Dodd-Frank, unless you have a ten million dollar capitalization, you get classified as a broker. And as a broker, you have additional disclosures, the required language of which pretty much scares your customers away to a direct lender. So, we are out of business. Multiply that many times, in every community in America. An apt example of ‘the law of unintended consequences,’ as well as job and prosperity killing legislation!’ (lightly edited. GFA)

…the Dodd-Frank bill is maybe the ‘final nail in the coffin of chattel finance,’ where manufactured housing is concerned? Whereas the necessity of added fees will necessitate a minimum manufactured housing loan of $78,000.00, to simply ensure the return of basic and added fees to a chattel lender. And outside certain high-priced local housing markets, how many times do we see manufactured home loans, especially on resale homes, in excess of $78,000.00? # #

Thanks,

Doug Gorman
Home-Mart, Inc.
9516 East Admiral Place
Tulsa, OK 74116
800-364-4663 Toll free
918-835-0500 Office
918-835-8146 Fax
918-250-6867 Home
918-640-1357 Cell
doug@homemart.us
www.homemart.us

Editor’s Note: Please click here to read the CFED document.

Again, Train to Oblivion, redux.

May 23rd, 2011 2 comments

Responses

After writing “The Train to Oblivion” for MHMSM.com, I fully expected to hear from its readers. I knew some would take the opportunity to essentially agree with what I had written, though often doing so anonymously. Not good to be known with too strong an opinion.

After writing about 30 major pieces for the late, greatly-lamented-that-it’s-gone Manufactured Home Merchandiser, and nine years in the 2000s of writing monthly newsletters, I also knew I would hear from others who would object to my comments. There is a substantial contingent of folks in the industry who view their role as cheerleaders, rather than analysts. Anything which smacks of industry criticism or is less than championing the industry, is painted as “mistaken”, if not downright traitorous. These folks can react quickly and strongly, particularly when it sours their personal stew.

I sat my fat azz in law school for three years, graduating with high honors. I was twice accepted after law school for the PHD program at Harvard Law School, an opportunity which lost out to having our first child. The minimum it says about me is that I paid attention to what was being taught, which was to analyze situations, determine what was important from that which was merely noise, and then decide a course of action based on that analysis.

Start Point

The “Oblivion” piece was a first step to setting up where the start point is at present for manufactured housing. Just as your need to know the “point of beginning” to give you directions to your destination, so we need to know the same. “Oblivion” set the start point, but is not, nor was it meant to be an all-encompassing white paper as to cause, effect and cure of the industry downturn. We’ll get to that.

The tenor of the piece is that from 1998 when 372,800 new HUDCode homes were shipped, until the present, as we “roll” along at 40,000 homes for 2011, something has gone grievously wrong. “Oblivion” sets the primary basis for that downfall as extremely flawed retail, chattel purchase money mortgages and the horrific loses associated with that, particularly in land lease communities. Truthfully, it just seems difficult to argue with that basic premise of “Oblivion,” whether you like it or not. Ask any lender.

Criticism

The two salient critiques I got after publication were 1) there are some people doing well in the industry; and 2) I haven’t come up with any solutions. Let’s deal with each of these individually starting with “hey Marty, some are doing well!” I want everyone to do well, the more the better. But, the reduction in home shipments from 1998 to the present speaks not of success, but of disastrous failure. There is no other way to say it, is there? If that offends cheerleaders, so be it.

It is as if I were to write a piece on the present status of the buggy whip industry since 1890 and someone tells me they Googled “buggy whip” and there are a couple of companies out there still thriving. (True.) That begs the question of where the 100 million+ horses running around in this nation in 1890 have gone and the incredible downsizing of that industry catering to the horse as a primary means of personal travel. A couple of success stories on buggy whips presently are akin to several “I know people doing well” remarks posted to my piece. Missing in the replies were where over 10,000 retailers have gone since 1998, the loss of the vast majority of lenders, loss of many LLCs, home builders, suppliers and every other stripe in the 1989-2005 MH industry, a process which actually has yet to stabilize. We are and will be still “losing them.” And some are doing well? Well, bless me.

Surely it makes some feel good to talk about the advantages of “affordable housing,” buy here-pay here, LLCs as rental MH apartments, and the need to observe renewed attention to our sales efforts. All great stuff of course, but my piece is meant to trace the past and probable course of industry trajectory. In spite of many people said to be doing well, scant attention is paid to the 90% of the industry already gone and that the probable trend is for more. Hiding behind “some are really doing well, Marty,” seems to me to be myopic in the extreme, and non-responsive to the matter. Correction of a deficiency begins with the realization one exists. That is obvious, to me, though I’m open to new information about “the industry,” not a few patches of good remaining activity. Please start with an explanation of how a decrease of 330,000 home shipments is “doing well,” and how we can start an upward trajectory again. None of the measures enumerated have had any positive impact in that regard, yet. I live in hope, with great skepticism.

Solutions

The second critique is that I appear to have no solutions, only pointing out problems. Interesting. My mentors never allowed that of me, or I of my people. It’s bad form. On my web site, as an example (martylavin.com), you’ll find an article entitled, “Hometown Banks 101: Where the money is.” The Banker who wrote in response to “Oblivion” talks about industry participants partnering with a bank. What a novel thought, and how interesting to suggest I haven’t spoken to that. Not only did I write an article on the subject for the July 2003 MHMerch, but I gave two annual back-to-back seminars at the Vegas show in the mid to latter 2000’s, both of which had over 125 participants and were the best attended of all seminars both years. I led the attendees thru exactly what is needed to be done to partner with a bank, including the following: “The first ingredient in this recipe for building a successful relationship with your banker is probably the most essential; you must protect the bank–the valued source of your funding–at all times by helping with difficult things.” I go on to enumerate the needed activities. See the article on my web site. I was there on this subject by 1972, protecting our bank, Guaranty Bank and Trust Company of Worchester, Mass, as we disposed of over 200 repos in the Carolinas, during that frightful 1974-1976 downturn. Our reward? A bank that stayed with us for years after, backing us up and down the East Coast. Yah, I think I got that one down awhile back.

Others have suggested I carp about the deficiencies of chattel lending, but have given no guidance on how to fix it. In a number of my newsletters I wrote copiously on exactly the needed solutions to correct the industry chattel lending model which had melted down, and in December 2007 I wrote the piece, “Saving Chattel Lending,” just one more in a long line of similar efforts. This one is full of possible solutions. Instead of being criticized for not offering solutions, it would be better to state I have spoken too much on the subject, with very few listening, frankly. This article also appeared in the MHMerchandiser. I’ve spoken with MHMSM.com’s publisher Tony Kovach and we have agreed to do an updated version of that article for his June issue on this web site, so please watch for it to be published in about 10 days.

The Whole

Again, the gist is not that specific opportunities do not exist in the industry, they do. My piece speaks to the industry as a whole industry, not as to specific opportunities therein. All of us have reasons to put a best light on our own endeavors. My pieces can be influential, with important people. I can inadvertently hurt a person’s or company’s enterprise by my remarks. That is why many would rather I keep it to myself, and I often do pull my punches.

People will react to that. One alludes that I’ve lost track of LLCs as I no longer have any. I still have an LLC, WITHOUT any debt. But even if I had none, I would look to a projected 40,000 2011 annual home shipments with not more than 10,000 going into LLCs today and the frequent emails I get from repo specialists for troubled LLCs, almost daily. And I would further look to rent-to-destroy, buy here-default here, and my favorite, LLC apartments. Does this all mean nothing? Are these good trends? Is this what will save a good industry, or even individual situations, or are these merely holding actions? Does one need to jump off a roof to know it will hurt? Did the 20 years of owning 1,600 LLC home sites by myself teach me nothing? I guess so.

One of my respondents just penned a piece on his blog on the rate and cost difference between buying MH and site built housing. Wow! How timely. I sent him a detailed example of the matter at least a year ago, but more importantly, wrote a piece on the matter in the MHMerch in January 2001. “Differentials.” Guess I was behind the curve on that one, eh? But hell, the fact one can buy a $122,000 site built for the same costs as a $65,000 MH shouldn’t be a problem, should it? How do you fix that one? I’m not sure my solutions extend to that.

Campaign

The image campaign rhetoric heating up again? In Oct ’08 I wrote a major article on this for the MHMerch exploring the reasons why it was needed. “The Industry Campaign: needed or extravagance?” I came down squarely on the absolute need. The industry passed on my suggestions. We traded the dollars saved on the image campaign for a minus 80,000 annual home shipments from the time of my article to the present. Now, . . . that IS penny wise and pound foolish. I also railed endlessly about it in my newsletters. Even I got tired of hearing it.

Just as the stock market should be viewed in light of the attractiveness of some individual stocks, not as a whole stock market, so I understand some folks are doing well, or at least surviving, but I stand by the statements I made in the piece. Seems some of the folks do not really believe in Marty’s prime dictum, though. For those who forgot: Forget what people are saying, watch what is happening. And what people are saying is things aren’t that bad cause some are doing well. What is happening is we’ve lost 90% of our industry. Please do not bore me with individual tales of success made by respondents to my article, who were either incapable of critical thought, or unable to speak the truth about the TOTAL and general industry condition, and which is the subject of “Oblivion.”

Old Friend

I lost my old friend, Dan Mendl last week, as he did not quite reach 81 years. Thinking back, I well remember his asking me where the people in business over 60 years of age were. We wandered in and out of appointments at a high clip in the late 1980’s and the 90’s, and at his 60+ years of age, we rarely met another older than Dan. Now that I’ve settled into 68 years, I’m beginning to understand. It gets wearing to hear the same solutions I heard in the 70’s, then the 1980’s, carrying into the 1990’s, sliding into most of the early 2000’s, but most not adopted, or even tried. Nothing changes in spite of the blather. You just tire of the same crapiola, presented as though it’s new. The one thing lenders knew how to do, and it has saved the few remainders: tighten up like crazy on chattel lending guidelines.

The Best

But I’ve saved the best for last. Here is one I’ve never heard before. (I lied!) This is novel, and is the best of all the comments posted. “Where’s the industry headed? Right where financing leads us.” So far, so good, I am in complete agreement. Then he continues, “and I think that will involve a contrarian lender dusting off a business model that worked pretty well 30 years ago financing MH’s in LLC’s.”

Amazing. I was around 30 years ago, in 1981. By that time I had been in Trailerville 9 years. Since 1972 to now, my own companies have transacted over $1 billion of MH chattel paper, primarily in LLCs. Through repeated head blows I finally came to understand that the above business model does not “work pretty well” for the lender. It might have been good for the community owners, and/or the factory, and perhaps even the homeowner. For the lender, the word “disaster” generally describes the results for 99.90% of all lenders using the business model of 30 years ago. Where is this notion coming from that the model then in existence for MH lenders worked well? Nothing could be further from the truth.

Don’t believe me? Ask Paul Nichols of Vanderbilt Mortgage, or Tim Williams and Rich Ray at 21st Mortgage, or Don Glisson at Triad Financial or Abdul Rajput at USBank, or John Harcher at SACU how that lending model of 30 years ago worked. They were all there, and I could name dozens more. Incredible that people should still believe that statement!

Repos

Oh, and repo costs in land/home deals? Yeah, I’m not really up on that one, either. The fact I spent 8 years as FannieMae’s full time manufactured housing consultant all through the 2000’s as their land/home and modular portfolio rapidly grew, crashed, was fixed and then worked relatively well didn’t prepare me for the kind of problems my correspondent detailed. It all was news to me after working on a multi-billion dollar portfolio of those type loans. Who’d a guessed?

Bromides

Now a whole new group of people are once again proposing many of the same old bromides to highly intractable problems. The greatest fear is not that we may not have possible solutions to our ills, but that even if we screw up the courage to try them, they may not be enough. There is a reason this is all happening, and it has nothing to do with the Aztec calendar.  Forget the cheerleading, analyze industry conditions with an eye for change or we can let it all go wherever it’s meant to go, on its own. And we know it has a running start on that course.  The good news being that even with 1000 annual home shipments, someone may still be doing well. I’m not sure the industry will be prospering, though. # #

 

MARTIN V. (MARTY) LAVIN
attorney, consultant, expert witness
practice only in factory built housing
350 Main Street Suite 100
Burlington, Vermont 05401-3413
802-660-9911 802-238-7777 cell
web site: www.martylavin.com
email mhlmvl@aol.com

Editor’s Note: We have again honored the author’s request to post his article “as is.”

If you don’t go forward, you’re not going to go anywhere

May 20th, 2011 2 comments

Marty, thanks for your writing.  You are going where no one wants to go, but should.

I (the bank) have been a manufactured housing lender since 1991.  Not a large one, but neither is the bank I work for (Oxford Bank).  I rarely participate or respond to anyone or anything via the internet; however, Marty Lavin’s commentary interested me.  [See The Train To Oblivion, May 16th.]

Mr. Lavin has identified the brutal facts, but not how to fix them.  Further yet, does anybody really want to fix them?  Everybody  seems to have beaten up and worn down.

I have outlived the Greentrees, Consecos and others that felt booking loans at high rates, extended terms, big fees and huge  volumes was the thing to do.

I am still lending but, only to parks that want to “partner” with us.  Everyone hates bankers right now; hopefully, what I have to say doesn’t make it worse.

Below are a few comments and a few things I have learned in my 20+ years of MH lending.  I am probably getting off the path somewhat, but Marty opened the door for some comments from the lenders side:

  • Rates, of course, are higher than an auto loan.  When you loan money for 20 years at a fixed rate for anything, the bank must protect itself for future increases.
  • Anyone who thinks that the bank makes a huge spread on these loans is just plain ignorant.
  • The park owners control the bank’s destiny, losses and expenses.
    Today’s rates are controlled by losses and expenses, not just cost of funds.
  • Bank regulators do not like MH loans or “Trailers” as they say.
  • A manufactured home is considered personal property and sometimes it’s considered real estate.  If someone wants to hang you – it’s real estate.
  • I believe the parks that do their own financing are building a monster.  Let’s hope they retain a large reserve for losses, understand fair housing and Federal and State compliance laws.  I think they should let the bank be the bank.
    Servicing is expensive; it just increased again with the escrow law.
  • Generally, most parks will sell their own inventory over the bank’s repos, even if the bank pays for advertising.  They will switch the buyer to their home.
  • A big part of the banks’ losses are the parks’ profits.
  • Greentree and some other mega lenders were foolish; high rates and big loan fees do not make good loans.  Worse yet, they would finance the fees.
  • It’s the park’s customer until it becomes a repo; then it becomes the bank’s customer.
  • Some parks must feel that the bank guarantees the lot rent since it financed the home.
  • Many park owners are not active enough in their parks and put an underpaid and inexperienced employee in the park manager’s seat.
  • Unfortunately, these things don’t have motors.  Lenders are totally reliant on the parks for help.  With values in the tank, it’s hard to justify moving them.
  • There are still some crooks in this industry: fake down payments, home options that are not really there and straw purchases are still around.
  • The FDIC deems anyone with a credit score of 660 and under a subprime borrower.  This gives the appearance that my portfolio is subprime.
  • Manufactured home loan brokers are very dangerous.

The industry needs to go forward, not backwards.

Find a lender and “partner” with him or her.  Help the bank when they have a repo by assisting them in controlling the loss.  The
bank is paying the park a commission to sell the home; maybe they could even mow the yard for free?  Maybe they could use their maintenance guy to perform cosmetic repairs at cost?  In return, they could benefit from offering financing at reasonable rates and quality delivery.  This isn’t hard stuff.

My bank is still in the business of financing homes, but only for a handful of parks.  These are the parks that have “partnered” with us to get the job done.  Both the parks and the bank are much better off.

My biggest problems at present stem from loans made years ago in park(s) that have been sold to a REIT, portfolio operator or out-of-state investor.  The buyers of these parks figured out that they overpaid and are now increasing lot rents to compensate for their mistake.  This is creating unnecessary repos and they could care less.  # #

Al Cole
Oxford-Bank.com
alcole@oxford-bank.com

The Train To Oblivion

May 16th, 2011 17 comments

The MH train comes off the tracks.

It took me a while in the early 2000s to recognize a sea change had occurred in MH chattel lending.  Always chattel lending had been a loser for virtually every lender involved in it.  But it had powered the MH industry to 20% of all new housing starts, being responsible for up to 80% of all purchase money MH loans up to about 2000.

What always put new lenders coming into the industry to sleep is that with a growing loan portfolio size, the first 3-4 years of loan growth mask the true loan performance of the portfolio for the entering chattel lender.  But once the portfolio size stabilizes, one can gauge the true portfolio performance going forward. It will show very poor performance.  The lender will usually panic, not knowing what to do.  The smart ones, not too many of those, will shut down the program right then and take their losses.  Most others will muddle on as the employees try to keep their jobs by assuring their bosses that they can handle it.  They never can.  The program will ultimately collapse as things get even worse.  “Take your losses now or take bigger ones later.”  Some choice.

Before year 2000, the process went through repeated cycles of this start-hold-collapse for chattel lending by innumerable lenders, starting in the ’50’s.  Always new lenders came lured by the “high rates” available in chattel lending.  Few seemed to recognize how difficult it was too succeed in MH chattel lending.  None wanted to recognize that it didn’t matter how high interest rates were, only how much of them you kept in the end.  All believed they were smarter than the previous failed lenders, and would do a better job than those before them who had failed.  Few did.  (Boy, did I tire of hearing that crapiola!)

But in the early 1990’s  Wall Street money came to chattel lending.  Those were happy days!  Money grew on every Tree, especially Green ones.  A bevy of retail lenders came from 1991 on, all of whom were going to out-GreenTree GreenTree, the industry giant.  All these lenders got easy access to “Wall Street” money, at least for a awhile.  The infamous Asset Backed Securities provided liquidity for loans as seldom before seen in chattel lending.  Since nothing had changed from the underlying difficulty of surviving chattel lending, few, if any, survived this bout as the industry peaked at 372,800 new home shipments in 1998, and started a descent which has yet to end.

It took me awhile to recognize this sea change in chattel lending.  Few of us foresaw the true depth of the problem.  But by 2001-02 I could see that this time it was different.  Always in the past new lenders had come to subsidize the industry with the losses they took with unsurvivable chattel lending.  In the past 50 years these horrific lender losses had allowed HUDCode factories to flourish, retailers to become millionaires and land lease community owners to keep parks full, even as many shamelessly raised rents.  Again, this was all subsidized by terminally flawed chattel lending.  It went unrecognized.

But worse, the Wall Street boys do not like taking losses up the butt and started to dissect the reality of MH chattel loan performance.  What they found was chilling.  Losses for the best paper in LLCs were in the 30-35% lifetime range.  In the scratch-and-dent category, losses sometimes exceeded 100%. But worse, now that they knew, they blabbed the information to the world.  Several Wall Street firms tracked MH chattel loan portfolios closely and put out monthly reports of the carnage.  This differed from the past, when lenders, mostly banks, S&Ls and credit companies took their losses and seemed too embarrassed to tell the whole world of their travails.  After all, just a year before they were widely touting how great the chattel MH portfolio was performing and the great contribution they were making to “affordable housing”.  That would change soon enough.  Little did they know then how great their “contribution” was to be.

Here is an interesting sidelight:  I’ve identified above the recipients of the lender’s losses.  Note I did not include the borrower.  Yes, they got into a home they should not been able to buy, but they hardly ever got to keep the home.  Either they couldn’t afford it, or when they tried to resell it, they were unable to, for a variety of reasons.  This brought divorces, loss of home, children changing schools and all the other personal tragedy the loss of a home brings.  Few apologies here by the industry.  “We gave them a chance at home ownership was the industry refrain.”  Swell.

By the time GreenTree/Conseco collapsed around 2001-2003, the MH chattel world had changed.  Forever.  Most did not recognized it.  It was said to be just a periodic pullback.  The industry would return, they said, it always had.  Lenders had lost their nerve.  We could get the GSEs to bail us out.  We could get “Duty to Serve.”  If they won’t do it, then Title I will.  To this day we have Pollyanna’s carping this drivel.  “Its simply a matter of better sales training.  Now subprime is done, it will allow MH to return.  (Forget MH chattel lending is the King of Subprime.)  We are the only provider of non-subsidized affordable housing.  Its simply a matter to fix HUD Subpart I.”  In the face of a 90% reduction in volume, can it be that these thoughts still drive an industry?  It seems unimaginable.  (New to MH and the Subchapter I quest?  It is a part of The Manufactured Housing Improvement Act of 2000 dealing with recalls, home installation and handling consumer complaints on MH.  Like Don Quixote, the industry DC operatives, live to believe that only these DC quests are important.)

Around 2005-2006 the industry still had enough muscle to have faced that we were operating from a Failed Industry Model.  The Roper Survey told us that.  All of the reasoning above would not save us.  Only an acceptance that drastic measures were needed could have changed it for us.  Since we refused to act, “The Market” did it for us.  It punished tone-deaf MH business behavior with ruthless abandoned, and is still doing it.  The industry still doesn’t listen, though one wanders whether trying to really do something about it would have any impact at this point.  Frankly, I doubt it.  The high home value depreciation and high loan losses at increased loan volume seem impenetrable.  We have failed to move against this, even if it is possible to do so, which is daunting at best.

With Dodd-Frank and SAFE in place, and other regulatory devices sure to come, the impediments to an easy, even a difficult industry response are many.  n the face of this we are still worried about Subpart I?  Were we to get everything we wanted there, how many more homes would we sell? Heaven help us that this is the response of a terminal ill industry by its leaders.

As with all struggling businesses, the industry has scurried to try to make up for the existing industry model deficiencies.  Don’t have Greenseco-type chattel lending available?  Heck, start some buy here-pay here and create your own.  Want to keep rents coming in?  Buy homes and rent them out.  Many came to MH to escape the apartment business, but are now doing a version of apartments far worse than real apartments.  Overlook the regulatory constraints, the illiquidity of self-lending loans, roll up your selves and go to WORK, boys and girls.  Hey, it worked in the past going back to the 1950s.  Oh, really, and how did they handle Dodd-Frank then, did you say?  Or SAFE?  Oh..

Its a changed world and having lost our own lending business here we’ve transacted since 1972, we are impacted as are most others.  We are not and will not be alone, as the industry gets closer to 40,000 shipments than to 50,000.  At those numbers, I can only assume a whole new tier of businesses are endangered, as most of us scramble to avoid facing the prime business dictum:  Get out of a dead business.  This is bolstered by my own Prime Dictum:  “Never mind what people are saying, watch what is happening”.  And what is happening is an open book.  All can, or should be able to read it.

I suppose those folks who went to those long-ago industry speeches I gave, rolled their eyes then as I correctly prophesied the point where we now are, can point to their own acumen.  Come on Marty, it can’t get that bad they said!  Sitting there now with 50% LLC vacancies and unsalable self-financed loan portfolios as their response, they can take solace in their prescient course of action.  Of course.  Frankly, I would much prefer to have been wrong, very wrong.

So what does this all mean?  I hate to say it because I’ve tried to remain in the same industry as you have, but my industry left me.  Has it left you?  What is the next stop on this train to oblivion?  # #

MARTIN V. (MARTY) LAVIN
attorney, consultant, expert witness
practice only in factory built housing
350 Main Street Suite 100
Burlington, Vermont 05401-3413
802-660-9911, 802-238-7777 cell
web site: www.martylavin.com
email mhlmvl@aol.com

Editor’s Note:  We have honored the author’s request to post his article “as is.”  As with all our Industry Voices Guest articles, we invite reader response and dialogue, either public (by posting a Discus response below) or private (phone or email).  Thanks for reading and getting involved!

Sherry Norris (AMHA) Reports on Alabama’s Tornado Recovery Efforts

May 13th, 2011 No comments

Editor’s Note: Following is an exclusive interview by Industry in Focus Reporter Matthew Silver with Sherry Norris in Alabama as that state recovers from the tornadoes of April 28.

In a conversation with MHMSM, Sherry Norris, Executive Director of the Alabama Manufactured Housing Association (AMHA), says the Federal Emergency Management Agency had the foresight last year to build manufactured housing units in preparation for future disasters, and stage them at Selma, Alabama.

Norris heard there are over 2,000 homes that are now in the process of being moved to the northern Alabama area where they are needed.

She says, “Some people are living in tents.  I heard of one family who was trying to build a shelter out of the debris of their home.  Those people need one of our houses ASAP.”

Congressman Robert Aderholt (R-Ala.), who represents District 4, where all the state’s manufactured housing plants are located, and Governor Robert Bentley, are insisting the replacement homes used for the victims of the tornadoes are from Alabama manufacturers.

FEMA has asked Norris to obtain figures from manufactured housing retailers in the state for an inventory of available homes once the units from Selma have been distributed.

Norris says the replacement homes are not the ones you might see on a retailer’s lot, but are three bedroom, one bath single sections, fully furnished and ready to be hooked to utilities.

Norris further stated FEMA is also preparing for the hurricane season, so the houses now being used will need to be replaced.  The flooding of the Mississippi may even require additional homes to be built.  # #

Sherry Norris, Executive Director of the Alabama Manufactured Housing Association (AMHA), snorris@charter.net, (334) 244-7828, www.alamha.org

Manufactured Homes Could Be Part of Post-Tornado Solution in Georgia

May 7th, 2011 No comments

Manufactured home community (MHC) owner/operators in Georgia are mobilizing support to make manufactured housing part of the post-tornado disaster solution.  David Roden and Spencer Roane are leading the charge with GEMA and FEMA officials to have vacant manufactured home community sites used to house storm victims.  They outlined a plan that would:

– save the government money,

– help get storm victims out of hotels and into homes,

– create jobs in GA and neighboring states,

– avoids the errors learned from the post-Katrina FEMA response.

Roden said part of the problem with the post-Katrina FEMA response was in not using existing infrastructure.  Vacant MHC home sites represent an obvious opportunity to save time and money for state or federal officials.  The MHC owners also expressed the wisdom of using 3 bedroom 2 bath homes rather than 3 bedroom one bath floor plans.  Local HUD Code home manufacturers could rapidly respond, creating jobs.  They say MH community owners could buy the homes when the disaster relief phase passes, making this a complete approach that avoids Katrina missteps.  This would also underscore the fact that manufactured housing is a valuable resource for rapid response to disaster housing.  Contact David Roden to support this effort.

David Roden, Mountain View Estates, 423-760-4819 or davidroden@yahoo.com