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The 2013 Tunica Manufactured Housing Show was Fantastic!

March 31st, 2013 No comments

What a fantastic turnout for the Tunica Manufactured Housing Show! The optimism of lenders, manufacturers, suppliers, community managers, retailers and association leaders was evident. There was much “buzz” over new innovations in the homes AND the participation of a couple of new retail and wholesale lenders.

I was very impressed by the attendance at the seminars. I overheard a couple of gentlemen discussing how they had been to all of the seminars and gained valuable and useful information that would benefit their respective businesses.

It also seems that manufactured home community management involvement has increased since last year’s show – wonderful news!!!

As the economy continues to slowly recover, consumers will become more aware of the affordable housing options. This shift will help every facet of the industry. More importantly – it will increase consumer awareness and (hopefully) education about the product.

I had the privilege of discussing my dissertation topic with a few fellow Tunica Show attendees. The commonality between the conversations was the need to improve the perception of manufactured housing to accurately reflect the high quality and extreme value the product offers.

Everyone seemed to agree that the biggest challenge was changing the way the general public viewed manufactured homes. While there is no magic cure that will solve issues, having conversations about benefits and challenges can lead to grassroots efforts that spur change. Movement of any kind in the right direction will have a positive impact. After all, our current President achieved his first election through grassroots movements and social media. If seemingly small changes can result in a sea-change of that magnitude, imagine what similar grass roots forward momentum in the manufactured housing industry can do…

One thing I like about the Tunica Show is that you never know who you will run into! I was able to meet “Uncle” Si Robertson from the hit show Duck Dynasty as he was touring the CMH displays. Later that evening (thanks to the awesome folks at CMH), I was able to meet Phil and Miss Kay Robertson AND listen to Phil’s testimony at the CMH Award Banquet & Celebration.

Phil shared that he had toured a manufacturing facility and witnessed outstanding work ethic. Not only did he recognize the value of the product, he appreciated the hard work of every person in the industry.

Talk about a great opportunity to change the consumer perception of manufactured housing! The stars of the most popular television show recognize, understand, and appreciate the product – how about THAT for validation and perception change!

There are lots of positive things happening in the manufactured housing industry. Whether in the developmental phases or getting ready for implementation, there are abundant opportunities for involvement and participation. ##

Lisa Tyler
Walden University
(Editor's Note: Lisa Tyler is a veteran of manufactured housing retail and is currently doing her dissertation en route to her PhD on a topic focused on Manufactured Housing)

(Photo credit: Lisa Tyler (right) with Uncle Si Robertson – left – from Duck Dynasty)

NCC Meeting News Update

January 27th, 2013 No comments

National Communities Council Members:

With the growing need for affordable housing combined with the rapidly evolving regulatory environment, lack of homebuyer financing, and other challenges, our industry has tremendous opportunities at the same time it faces significant hurdles. Both MHI and the NCC have experienced a period of major transition, and with our Washington leadership team now firmly in place, I believe the most important step ahead is to develop a vision and action plan for the NCC that provides the foundation to carry us through the next few years of supporting the industry and servicing our membership. In lieu of the NCC business meeting that has been held traditionally in conjunction with the MHI Legislative Conference and Winter Meeting, at the upcoming meeting the NCC Executive Committee will instead hold a closed planning workshop focused on solidifying the NCC’s vision for the future. Our goal will be to define a vision that ensures the NCC supports MHI’s broader legislative advocacy and marketing outreach efforts, provides the range of services most valuable to the variety of constituents we represent, makes interim NCC meetings more productive for all of our members, and expands our membership to add to our resources and strength as the only MHI division representing community owners.

While the traditional NCC meeting will not be held during the upcoming MHI Legislative Conference and Winter Meeting from February 24-26, I strongly encourage all NCC members to attend this important gathering and support MHI’s advocacy efforts. Our industry has an excellent opportunity for expansion as the housing market recovers, but we need unity and alignment to ensure the regulatory and legislative environment supports our goals. The upcoming Legislative Conference in Washington is the best place to contribute by making our collective industry voice heard on Capitol Hill and helping your legislators recognize our industry’s vital role in providing affordable housing.

As just one example of how your voice can make a difference, the recently released CFPB rules will have a significant impact on community owners and operators, and while the industry did not achieve all of its goals for the new rules, MHI and member efforts clearly had an impact.  For example, within the Qualified Mortgage rules, the CFPB did expand the spectrum of loan amounts and has proposed a qualified mortgage exemption within the new category of “smaller creditors.”  Just today, we are learning that it appears all new manufactured homes may be exempt from the new appraisal requirements for higher-risk mortgages.  While information continues to develop, it is critical that we work together in the legislative process to present industry unity and bring positive results.

The regulatory environment will continue to shift rapidly as additional Dodd-Frank and CFPB rules are promulgated and reform efforts are undertaken. These changes and their impact on your business will be central to the upcoming Legislative Conference, and your participation in MHI’s advocacy efforts is vital to ensuring the best result. I look forward to seeing you in Washington and to working with the NCC’s Executive Committee to lay out a vision that leverages our opportunities, responds to our challenges, and supports your success well into the future.

Sincerely,
David

David B. Lentz
Chairman
National Communities Council

(Editor's Note: this memo was originally sent to NCC members by Vice President Jenny Hodge on Tuesday January 15, 2013. It is reprinted here with permission.)

Preserving Access to Manufactured Housing

April 24th, 2012 4 comments

The manufactured housing industry has been confronted with the most serious challenge to its existence in its history in the form of the Dodd-Frank bill. Supporters of the bill failed to take into consideration that, as written, the Dodd Frank bill effectively eliminates chattel (home-only) financing for loans under approximately $78,000. The bill essentially lumps chattel lending criteria in with the same real estate lending restrictions, thus ignoring the higher cost of funds for home-only loans. As the loan amount declines, and the higher cost of funds plus the fixed costs of making a loan effectively kick home-only loans into the predatory lending category once the loan amount hits some $78,000.

H.R. 3849 is a proposed bill that has been introduced into the House of Representatives by Indiana's Congressman Joe Donnelly and Tennessee's Congressman Stephen Fincher. The bill is aptly titled the Preserving Access to Manufactured Housing ActIn addition to limiting the impact on manufactured chattel loans from the restrictions described above that were introduced by the Dodd-Frank bill, the proposed H.R. 3849 would exempt manufactured housing salespeople that are not deriving income from the proposed financing the salesperson is trying to arrange.

Oklahoma was the second state after Mississippi to have its entire congressional delegation signed on as co-sponsors of HR 3849. I was able to help secure the backing of Oklahoma's congressional delegation through meetings with either each of our congressmen, or with their staff member with responsibility for housing issues. The following points were helpful in securing their support:

  • Manufactured housing is not only the most affordable housing available in the United States, our production capabilities are the most efficient in the world for the production of entry level housing.
  • The manufactured housing industry although monitored by HUD, is self-funded through label fee payments to HUD. How many functions of the federal government have no financial drain on the government's resources?
  • Failure to act will eliminate the financing options for all potential purchasers in the very lowest economic sector of our market, those people trying to purchase homes under $78,000. Our industry's average loan is $58,000. The single-wide market would essentially be destroyed.
  • Failure to act will eliminate all financing options for about half of the existing 8.8 million manufactured home owners who may try to sell their homes, so they also have an incentive to contact their congressman and senators.
  • Your congressman should be receptive to our industry's message. You do need to get in front of him or her. Getting to Washington, D.C. may be cost prohibitive, but getting to the congressional offices in each of your home states should be doable.

A pressing need at the moment is to find a Democratic senator to help roll out a senate version of H.R. 3849. Senator Tom Coburn (R, OK) has agreed co-sponsor the bill on the Senate as long as we have a Democratic co-sponsor who has the approval of Senator Harry Reid for the roll out. Please inform me if that occurs and I will inform Senator Coburn. # #

Post submitted by MH Retailer

Doug Gorman

HomeMart, Tulsa, OK

doug@homemart.us

(Editor's Note: the link to the online resources above were added for your convenience. You can find your elected representatives at this link here. You can pass along a free 'third party' resource for manufactured home owners and residents to consider and engage on this issue at this link here. Our thanks to Doug Gorman for the column and for his years of ongoing volunteerism and service in manufactured housing. Others are encouraged to comment or share their own Industry Voices Guest Column about this or other topics of Manufactured Housing Industry interest. You can submit a column by emailing tony@mhmsm.com with the words Industry Voices Guest Column submission in the subject line.)

An MH Industry Turn Around Plan, Part II

November 16th, 2011 No comments

An MH Industry Turn Around Plan, Part II

 
In my previous article, I explored the potential benefits of an alliance that included not only industry players, but the involvement of the end user – the homeowner. Regardless of the geographical location and cultural differences in this country, affordable housing is a necessity. Whether a consumer is interested in purchasing a manufactured home on land or renting a site (and/or home) in a manufactured home land-lease community, the end result is the same; occupancy of a manufactured home.
 
Like an uncoordinated kid who accepts being chosen last for a sports team, the manufactured housing industry has all too often settled for being considered the less than optimal choice for consumers. At some point, that uncoordinated kid is going to learn the rules, receive instruction from coaches, gain support from teammates, and develops the skills and passion for success at the game. This hypothetical player is going to seek any available resources – from physical fitness and honing skills to setting personal goals and overcoming obstacles – in order to improve positioning. Obviously, the kid is not on this journey alone – coaches, teammates, parents, and fans play an integral role in turning the “last choice” into the first round pick.
 
In a similar manner, the MH Alliance is taking a holistic approach to providing solutions to the manufactured housing industry. One of the biggest hurdles is gaining support from all industry players. The MH Industry is highly segmented – manufacturing, retail, communities, suppliers, finance and insurance, government entities, etc – all hold separate paradigms. More time may be spent by some blaming the other segments for the industry downturn than is spent pulling together and taking action to reverse the trend. The concept of working together to identify and implement sustainable solutions may thus be overshadowed by the reluctance to change and move beyond one's comfort zone.
 
Sports teams recognize that the weakest link can be transformed into the strongest point through the right drills and effort. Therefore, the team takes a holistic approach by identifying specific problem areas and identifying solutions to increase the level of strength by improving the weakest link. The team members recognize each individual’s contribution and the value that it adds to the team’s performance. The MH Alliance is a collective venue that gives balanced value to every player on the team. The strategy is based on breaking down the walls of segmentation to form a team with a unified approach to problem solving. The only “favored children” ought to be the consumers – the manufactured home owners! – of the Industry's products and services.
 
Using a systematic approach, problems are identified and a collaborative effort is used to develop strategies and solutions. The MH Alliance can benefit manufacturers by distinguishing them as a valid and credible source of a much needed product. Quality control issues have been hammered in the media and public opinion. Industry professionals are well aware that manufacturers are held accountable for quality standards. However, the general public – POTENTIAL CUSTOMERS – are not privy to the same information. Consumer awareness and education is a necessary component for image change, yet the current individualized strategies are all too often ineffective. A more unified effort therefor is a must.
 
Information about manufactured homes are usually gleaned from internet searches or a visit to a retail sales center. Manufacturer participation would be linked to current homeowners through the MH Alliance. Not only would the linkage provide access to potential consumers, it would also improve accountability and provide transparency.
 
Manufactured home land-lease communities, MH Retailers and others would also benefit from the Alliance. Let's look at a quick example.
 
Unemployment, foreclosure, and divorce rates are at all time highs in this country. The commonality between the three is that the actions produce a greater need for affordable homes and rental units. Part of the consumer’s resistance to MH Communities (MHC) is the negative stigmatization that is derived from a lack of consistency among owners or managers. One MHC may require yard maintenance requirements and a neat home site with enforced rules while the other allows a goat to eat the grass or you can see barking dog chained to the steps or a tree. The carrot of access to marketing dollars can be a tool for the MH Alliance to involve community owners and encouraging a set of standards will move the choice far beyond the “trailer park” and “mobile home” mentality. Furthermore, by targeting and driving 1-2 star customers to 1-2 star locations, and driving 4-5 star prospects to 4-5 star locations, consumers will find the 'right lifestyle choice' for their needs, wants and budgets.
 
The same can be done with “street retailers” sales centers. We have all seen the state of the art sales centers with HUD Code and modular homes that look like or are ground set, with great landscaping, furnishings, etc. Such 4-5 star retailers should be the ones to see the 4-5 star customers. Those retailers who have 1-2 star locations will have the 1-2 star clientele driven to their sales centers.
In marketing, one goal is always to match the right product and service with the right buyer. One of the good points that the MH Alliance plan offers is that it will avoid marketing disconnects. This will result in more closed business.
 
A key point to remember is the MH Alliance is more than just marketing or image building. So while this article has focused on that aspect, it is important to remember that issues such as better exit strategies for lenders and home owners, improved financing and much more are a part of the mix. Perhaps we can look at those aspects in a future column. # #
 
Links to comments from Industry Professionals who have participated in an MH Alliance/Phoenix Project GoToMeeting small group webinar.
 
 
(Editor’s Note: All links in this article and some edits were provided by MHProNews.com for context to Ms. Tyler’s article. It is good to recall that Ms. Tyler's perspective includes years of MH Retailing and MH home ownership.)
Lisa Tyler, MBA
Marketing Instructor
Walden University
Planning a doctoral dissertation on manufactured home marketing and image.

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.”

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!