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Reading The National Association

August 12th, 2011 2 comments

The Journal

I get “The Journal” monthly, the Jim Visser published magazine that appears to be the sole remaining print manufactured housing periodical. Others, including the much beloved Manufactured Housing Merchandiser, dropped by the wayside in the recent past, as advertising support fell off. Take HUD Code home shipments from 372,800 in 1998, and let them free-fall to some 50,000 in 2010, and that 86% drop annihilated much of an entire industry. We see the results about as everywhere.

I read The Journal regularly, reading some articles carefully and skimming others of less interest to me, but I look at all of them. Note that all of the writers therein are either executives at MH trade associations, or consultants. The tradeoff for the publication is a plentiful supply of written material for free, which they sandwich around their advertising. The writers, mostly consultants, get no pay but are happy to write the pieces to highlight their acumen in their area of expertise, sometimes leading to paid consulting assignments.

We also get some “infomercials” from paid advertisers. They buy an ad and the periodical allows them to write a “puff piece,” often nothing more than a glorified press release. No worries mate, The Journal is not the Wall Street Journal and no one expects it to be.

All the materials therein provide information, which is what advertising is meant to do. The reason Jack uses Enzyte after playing golf is that it makes him a “bigger” man. Informative, right?

Read the articles written by a number of the regular contributors in The Journal or an online ezine like MSMSM.com, and you begin to have a feel for the person or organization producing these pieces.

Trade Associations

As an example, both the manufactured housing trade associations, Manufactured Housing Institute (MHI) and Manufactured Housing Association for Regulatory Reform (MHARR) use the pages of The Journal and MHMSM.com to report their goals and positions on industry matters they deem important. It is also very obviously a recruitment tool for them.

And what can we glean from the decade plus of pieces there by the two national associations in The Journal?

The first thing we deduce is that MHI, through its last three leaders, strikes a measured approach to Washington matters. Being a collection of both home production and the dreaded “post production” segments, they come across as informed, conciliatory, and doing what they can to further the industry’s goals, as envisioned by a few large and powerful members, especially those who are heavy dues payers.

The MHI employee count has plunged in the last 10 years almost as much as industry home shipments, yet I do not notice that much fall-off in their accomplishments. This either says a great deal about the efficiency of the present crew there or the common occurrence in organizations to grow employees more than accomplishments.

On the other hand, MHARR has been, with a brief hiatus in the last few years, almost exclusively the venue for the HUD Code home producers. At MHARR “post production” seems like two dirty words. The HUD Code, the feared federal regulatory scheme of the late 1970’s, brought cries of “it will destroy the industry” before it’s taking effect. Since then, like the “Stockholm Syndrome” it has taken full control of MHARR, and their strong expressions in the pages of The Journal and everywhere else they’ll be heard.

One can only view it as a hate-love relationship with the HUD Code as interpreted, declared and attacked by MHARR’s fearless battering ram, Danny Ghorbani. Say what you will about Danny, he is knowledgeable about the HUD Code as no one else, and relentless in his pursuit of seeing it applied as he sees its meaning.

Danny’s problem, of course, is that not everyone sees it his way. I haven’t noticed MHI being quite so animated in its pursuit of “the Code.” Oh, I’m still waiting for Danny to complete the Manufactured Housing Improvement Act of 2000 (MHIA 2000) Subpart I mandates, his 10-year quest I think as yet uncompleted.

Different Heads

Anyone who has read the pieces by the national association heads here at MHMSM.com and elsewhere will have the feeling that MHI and MHARR are very different organizations. If I’m asked which is more effective I can only comment that neither has been able to stop the regulatory onslaught nor marshaled a unified approach to correcting the deficiencies of the Manufactured Buggy Whip industry. Their efforts have all been in Washington, where they all live and work. Other than the “Duty to Serve” inserted into the GSE mandates, I’ve seen little or nothing which would sell one more home, which should be the aim of the national associations, not the ease of home production.

Blocked weather radios?

Well Hells Bells, Boy, that saved $40.00 per home! Look how that saved $40.00 spurred the sale of homes!

The industry has a whole news media constantly telling the public of the danger of turbulent weather towards manufactured housing. So the battle against weather radios comes off in the media as lack of care for consumer safety by the MH industry. Instead, the weather radio, perhaps not the best weather Paul Revere, could have been taken by the industry and used to show how much MH cares about consumer safety in a lemons to lemonade move. The industry might also have supported proper installation and anchoring of homes. Those moves were fought everywhere, including Florida, where anchors were slammed down our craw. Who was the first to take credit for the very fine job anchored MH demonstrated after the numerous hurricanes in Florida? You tell me!

Waiting to See

But here’s the article I’m awaiting to see in MHMSM.com and in The Journal, by both organizations: Here is a list of the items we have accomplished in Washington, and elsewhere WHICH HAVE LED TO THE SALE OF x MORE HOMES AND MADE THEM A BETTER VALUE FOR OUR CONSUMERS. Wanna see that one? I sure do.

Perhaps it’s unfair to pick on the two national associations. They are both staffed with good people doing what they think is right for the industry. Maybe our expectations for their results are too high.

Could it be these national associations exist only to create and support networking opportunities between industry players and to inform of matters deemed to be important or interesting as it affects the industry? Long ago I came to that conclusion.

The starkest example of the inability of the national associations to really matter beyond information and networking occurred during the period of 2001-2010, especially in 2004-2008, as frequent attempts were made to “restructure” the so-apparent industry defects which were destroying industry sales.

For a variety of reasons, none of the grandiose measures proposed, vetted and formulated in writing came to fruition, as we saw our associations have no ability to restructure an industry. Only the marketplace has that ability, and it proceeds to do so apace. Note that shipments through June of 2011 were down almost 12.3% from last year. Let’s face it, we blew what little wad we had in Elkhart in June of 2010 when FHFA, the GSE’s regulator, told the industry plainly: Our Duty to Serve (DTS) the MH industry doesn’t extend to chattel lending, as the GSE’s already have enough problems without getting into new and potentially troublesome areas, where they have very limited expertise. So much for Duty to Serve and all the homes it would sell through new chattel financing from the GSE’s.

Minor Success

The associations did help get FHA Title I (Chattel Loan) reformed last year, after the program was long time moribund. First year loan volume in 2010 was hardly encouraging, but OK, put that on the list as an accomplishment, limited as it is.

The horse has left the stable on SAFE, Dodd-Frank, other regulations and Super Consumer Agency. Both national associations are actively trying to reform major portions of the laws to exempt MH retailers and others from the force of the laws and their regulations. I suppose a strong selling point by the industry can be the straightforward reputation MH has for integrity in the sale and financing of homes. (Ah, they may have to back off from that one.) I think instead they are going to use affordability of our homes and limiting consumer choices as reasons to exempt manufactured housing from the new regulations. That event, should it transpire, should turbo-boost new home shipments! Right?

Wait a minute. Those laws, bureaus and regs haven’t been in effect all during the explosive industry dismantlement since 1999, so even if the above laws do not take effect against MH they will only reduce the slide, and do nothing to increase shipments. Whoops!

Communiqués Aplenty

Every month we read the numerous communiqués from both national associations. MHI seems the more measured with a range of information and an attempt to influence law makers and regulators with an effort to strike a balance between persuasion and facts. They do not seem to get much done, but then again, why should we expect the MH industry, a true 90 pound weakling, to get things done on SAFE, Dodd-Frank, and Super Consumer Agency when real powerhouses like the Mortgage Bankers and Realtors have had so little success. How, indeed?

Read one of the missives from MHARR and at first blush these beautifully structured sentences and paragraphs speak of power, passion, and a non-compromising attitude. I suppose the reality would be more palatable if not for the fact that this association is a loud-mouthed 90 pound weakling, but a weakling nonetheless. Their endless wrangling with HUD and others almost seems like that cartoon where Bugs and Elmer Fudd go to work every day, punch the time clock, spend 8 hours abusing each other, then punch out at day’s end and go home for a burger and a cold beer. It’s all a game.

And I don’t really blame the staff at MHARR, as they are employees who are guided by the officers and members of the association. It is they who foster this pugnacious attitude. If they have turned MHARR into a “wind them up and let ‘em pummel” HUD or whoever, it is because many in MH have this deviant thought that the “affordability” of the homes the industry produces allows them special prerogatives at the political table. What they do not apparently understand is that affordability of our homes is in the eye of the beholder, and in any event, loan defaults trump home affordability. The industry and their national associations make too much of “affordability” and the results show.

This would all be amusing, of course, if in the course of being a lobbyist, which MHARR is, it actually got things accomplished. Instead, we see a lobbying effort whose response from those they lobby is to roll their eyes about MHARR and call in sick when they are expected to visit.

MHI is conciliatory but gets little done and MHARR is pugnacious and gets little done. Maybe our expectations are too high for what each can and does accomplish. And certainly as shipments have plunged, so has the industry’s importance, PAC money and influence. Hang on to that affordability, it’s all we’ve got!

The Roles

Currently, as the MH industry press explores the roles of the two national associations and whether another is needed, or whether there is any hope the existing two could and should merge, I’m bemused by all the attention to this concern. (Merger you say? Sure! Fool me once, shame on you, etc.) The role of each seems clear to me. MHI is the broad purveyor of consensus and civility, calling on uncaring bureaucrats who do little for them, but meet with them. MHARR is the pit bull, knocking on D.C. doors wherein frightened bureaucrats lie prostrate, with the door well locked. Don’t come in! One tries persuasion, the other intimidation. Both can work in the right hands and proper hands, but the limitations of each, as it applies to the industry, is clearer than ever.

At the heart of the matter is that mortgage defaults and loan losses trump home affordability and consumer choice. No matter the strategy employed by the two national associations, talking home affordability has its limits. In fact I daresay it is not affordability which drove bloated 1990’s MH shipments and sales. No, it was transaction ease, that is, it was easy during the Greenseco era to buy and finance a manufactured home. Home affordability to a degree remains, but transaction ease left, with the results we now see. I’m not sure how the national associations can react to that, for in order to re-establish transaction ease, someone has to take on some massive chattel loan losses. Any volunteers? Danny? Thayer? Anyone? # #

Post by

MARTIN V. (MARTY) LAVIN
attorney, consultant, expert witness
practice only in factory built housing
350 Main Street Suite 100
Burlington, Vermont 05401-3413
802-660-8888
802-238-7777 cell
web site: www.martylavin.com

email mhlmvl@aol.com / marty@martylavin.com

 

 

 

 

SAFE Act – The Final Rule – and what it means to the manufactured housing industry

July 6th, 2011 No comments

The SAFE Act’s final rule has been released by HUD just as predicted – before July 1st. So for those engaged in captive finance who have put off dealing with the problem, it is now time to get busy.  Because the time before enforcement is shorter than might be expected in some quarters.  Predictably, there is some confusion already and the lengthy document is not even cold. This article should clarify for those who need to know and understand what the final rule means to them.

We have had a team of experts and attorneys going over the document so we can provide authoritative answers that those engaged in captive finance can count on for guidance.  A decision was made to put this article in the form of questions and answers for clarity. But the questions are not necessarily actual questions from readers.

First – The Feds verses the States – Who is in Charge?

The final rule clearly reiterates what was stated in Savanna, Georgia at a meeting when questioned by me some time back.  This sets the minimum standards for compliance with the model legislation but lacks both the power and will to restrain the states from setting higher standards.  States can set additional standards, but they cannot usurp the minimum standards.

Are retail sales people now exempt from licensing in relation to the SAFE Act?

If they follow the rules they are, but, if they fail to follow the rules, they are not.

The final rule is somewhat more liberal than anticipated, which is a huge relief for the entire industry.  But there are still rules.  A salesperson may take, and assist in the filling out, of an application for transmittal to someone else at another legal entity who actually offers to negotiate loan terms, as far as the federal government is concerned.  States are free to disagree, and to place more restrictive rules in place.  Another key feature is the salesperson may not negotiate terms or be compensated by those who do.   However, the mere sharing of general information about a financing source, discussing hypothetical financing options, i.e., options not related to a specific financing source, giving the homebuyer a list of available financing sources without recommending any of the sources, discussing a buyer’s ability to afford a home, presenting or discussing generic facts or generic rate sheets, and/or closing personal property transactions would not be covered under “offers or negotiates”.  While sales commissions on the sale of the home itself are not considered compensation or gain for purposes of the SAFE Act, if the commission is paid out by the same entity that does offer and negotiate to make a loan, those sales commissions may be subject to scrutiny as compensation or gain, and those entities engaged in any form of owner financing are urged to contain their lending in a separate legal entity, including those engaged in rent to own, lease purchase, and lease option transactions.

Is Chattel Lending for Manufactured Homes, RVs, and Boats Exempt from the SAFE Act?

No.

Is Seller Financing Exempt from the SAFE Act?

Only if it is your own residence, or vacation home.

May a Person or Entity that made a loan prior to the SAFE Act modify that loan for the benefit of the borrower without being licensed under the SAFE Act?

HUD chose to defer judgment to the Consumer Financial Protection Bureau on that issue.  It should be noted that many states do require such and other licensure if the modification is permanent. Since this is an additional requirement, neither HUD nor the Consumer Financial Protection Bureau will act to ameliorate any such state requirements.

May we utilize our attorneys to originate our seller finance loans so we do not need to license?

An attorney may not act as a “straw man” for the actual lender unless the highest laws of that state specifically define those duties as part of the practice of law in that state.  Attorneys are allowed to prepare documents and provide legal advice, as well as assist in a transaction without licensure, but they may not act as originator or lender with SAFE Act licensure.  Many states will have additional requirements for lenders, attorney or not.

May we utilize a licensed loan originator to avoid our need to be licensed when seller financing?

From the federal government perspective of the SAFE Act, the answer is yes.  With that said however, there are serious complications that the final rule chose to ignore.  In all but a very few states, the practice of lending requires state licensure, so while an individual or entity engaged in providing some form of financing for the manufactured homes they sell may be able to avoid SAFE Act licensure, they must obtain state licensure as a lender.  Many states will require SAFE Act licensure as part of the process to obtain or maintain the other required licenses.  Because some states require the originator to also service the loan in total, the process becomes even more complicated.  Some states have already adapted the stance that SAFE Act licensure is necessary to modify even loans that predated the SAFE Act.  If you are interested in pursuing this strategy, make sure you have sought out competent advice on the requirements for the state or states in which you plan to operate.  There are other programs that do meet all the requirements necessary to avoid licensure of both SAFE Act and state lending licenses available in the manufactured housing industry if avoiding licensure of any kind is your goal that avoid the pitfalls of using an MLO only firm.

Is there now reciprocity between states to avoid all the duplication for multi state operations?

It is the federal government’s statement that it does not wish to encourage a “race to the bottom,” and thus is not encouraging such reciprocity, but cannot stand in the way of the states if they choose to participate in some form of reciprocity.

This synopsis of the Final Rule was created with the assistance of two nationally known law firms under retainer to Rishel Consulting Group.  It is not offered as a legal opinion to anyone reading this material, and their liabilities are limited to their retained client, Rishel Consulting Group.  Additional detailed information on the Final Rule is available in the July issue of Captive Finance News. # #

Ken Rishel, Rishel Consulting Group, ken@rishel.net

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.”

Into the Great Green North

January 25th, 2011 1 comment

A Conversation with Kathleen Maynard, CMHI

CMHI logoUnlike the manufactured housing industry in the United States, the market for manufactured homes in Canada remains rather prosperous by comparison. A Canadian Manufactured Housing Institute (CMHI) report for the 3rd quarter of 2010 shows some 3,608 factory-built single-family homes were started in the third quarter, representing a 17 percent improvement over the same period in 2009; and that factory-built units have started to improve as a share of total single- family housing starts. In raw numbers, that may not immediately impress, but consider the population variation. The population of Canada is approximately 33,700,000, compared to some 307,000,000 in the U.S.

The healthy market has attracted a number of U.S. companies to become certified to do business in Canada where communities are being updated and renovated. There are also important distinctions in the market that some credit with the success of the industry in our northern neighbor.

The third-quarter report also showed a surge in imports of manufactured buildings, and weak exports resulted in Canada registering a trade deficit of manufactured buildings, its first since the fourth quarter of 2008. The report indicates that although the U.S. still accounts for the majority of exports of manufactured buildings, demand should continue to waver as the housing market in the U.S. remains depressed.

Kathleen Maynard, Executive Director and CEO of the Canadian Manufactured Housing Institute, spoke with MHMSM.com about some of the differences between the market and regulatory environment in the U.S. and Canada.

A major difference, and one that has kept the market strong and attracted U.S. companies, is the fact that chattel loan financing is for the most part readily available in Canada.

Maynard explains the Canada Mortgage and Housing Corporation provides chattel loan insurance for manufactured homes when land is not involved.

“If you’re putting a home into a land-lease community without purchasing the land, then they provide the insurance to facilitate those sales,” Maynard says. “It’s required you need to get mortgage insurance with less than 25 percent down payment. CMHI provides that.”

A five percent down payment requirement is typical in Canada. The maximum amortization period on chattel loans is 25 years. Effective March 18, the maximum period is 30 years for other mortgage loans. Maynard says other features of the two types of loans are consistent. Default rates on chattel loans are not available.

Perhaps most notable is that Maynard says there is typically appreciation on homes purchased with chattel loans in Canada.

“There would be a comparison made of recent purchase prices of similar homes in the area, and factors such as improvements and retrofits made would be taken into account,” she says.

While manufactured homes in the United States are somewhat distinct from other forms of both factory-built and site-built housing because they follow federal manufacturing and safety standards, Maynard explains there is no equivalent to the HUD Code in Canada.

“There’s no across-the-board federal standard,” Maynard explains. “Anything produced in the factory has to meet the same requirements.” In some ways, she says, it may be easier to have factory-built housing installed in Canada. All factory-built housing must meet standards set by the Canadian Standards Association (CSA).

That’s not to say local building officials aren’t able to at times restrict the placement of manufactured housing. Local building officials do have the authority over technical requirements.

For example, Maynard says some local jurisdictions don’t approve homes built to something known as the Z240 standard, which she says is the closest thing Canada has to the HUD Code.

“If it’s just built to CSA Z240, they may not approve it,” she says, explaining that that standard has recently been updated to mirror the national building code, which is voluntarily adopted by Canada’s provinces.

Zoning issues can also prevent placement of manufactured homes in Canada, but that, she says, is largely due to issues surrounding terminology and outdated regulations. These issues are particularly acute in the province of Alberta.

This is not to suggest the grass is always greener across the northern border. The industry has had its ups and downs in recent years. Maynard says while 2008 was generally a very good year for the industry, 2009 was terrible, and while 2010 started off strong, there was a bit of a decrease in the second half.

“Most economists are projecting deceleration for 2011, but not a complete collapse or anything; just a downturn in keeping with demographic requirements,” Maynard says. “Prior to economic meltdown, we were producing at levels above what was projected by demographic requirements. Particular markets were very hot. What they’re saying now is a return to normal. 2009 was below normal. 2010 and 2011 are stabilizing.

Regionally, Maynard says Quebec and Ontario did better in 2010 than 2009 and activity in British Columbia is on the rise, but Alberta is “not as hot as it used to be.”

“There was a huge boom in Alberta and Saskatchewan in ’06, ’07 and ’08,” Maynard says. “It’s not as hot as it was, but still good there. No market is experiencing a huge boom.”

Maynard says “the landlease community option has been more attractive to first-time buyers looking for lower cost, or seniors who want to free-up equity and spend half the year in Florida. Typically the industry has looked to those consumer segments.”

While manufactured housing typically makes up ten percent of single-family housing starts in Canada, Maynard says, as for over-all starts, multi-family is accelerating faster than single-family.

“It could be due to housing costs, aging population, all sorts of things,” she says.

While the hottest industry topics in the United States seem to center around financing and regulation, the most talked about issues in Canada are an aging population and how that affects the number of sales and type of units and how design might be affected, a shortage of skilled labor and the use of social media.

“The shortage of labor is in a way a result of aging population,” Maynard says. “The average age of a brick layer is something like 68. There are a range of federal and provincial programs trying to deal with that.” For example, she says the ideas of additional apprenticeship certifications and allowing apprentices to move across provinces are being explored.

Maynard says the aging population is resulting in more multi-generational households, so demand for homes with two master suites, as an example, is on the rise.

The biggest difference, Maynard says, between the industries in Canada and the United States is the distinction made between manufactured and factory-built housing in the U.S. That distinction isn’t made in Canada and may be the reason why what is called manufactured housing doesn’t have much of a stigma across the northern border.

“There has been a lot of positive press (in Canada) with improvements in design and green technology and with manufactured housing being an environmental choice,” Maynard says. “There’s interest in the architect and design community. Developers and planners are seeing it as a good green choice.

“We talk more about factory-based construction,” she says. “That’s been a way to address the stigma. That was a concern for many years. There’s more of a recognition that with certification and quality control, waste-management and protection from the weather, the benefits are more recognized.”