Posts Tagged ‘factory-built home’

Study Suggests Cities and Towns Should Accept New Manufactured Housing Communities

September 1st, 2010 No comments

William P. McCarty is Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago. His recent study took a look at crime in mobile and manufactured home communities. The findings: there is no significant difference between the rates of crime in manufactured home communities relative to other residential areas. The study concluded that cities and other municipalities should not be so reticent to allow the creation or expansion of manufactured home communities, and indeed suggests that communities have a vested interest in providing housing options for its citizens. The evidence in the study suggests that local regulators should seek to make sure that the permitting system is disposed towards allowing greater placement of manufactured home communities.

In an exclusive interview with Reporter Eric Miller, McCarty offers some additional insights into crime and mobile home communities.

(Editor’s Note: Prof. McCarty uses the phrase “mobile home park” generically, although the Industry uses this phrase to differentiate homes built before the HUD Code of June 15, 1975, from “manufactured home community,” those built after that date.)

1. Why did you decide to take a look at crime in manufactured home communities?

I have always been interested in how the presence of certain types of businesses or other developments can affect crime. This type of approach has been taken through examinations of public housing structures, bars, and schools, for example, but it had never been done with mobile home communities. I became interested in mobile home communities due to the persistent stigma against this type of neighborhood. Even though the perception existed that these places were bad, I could not find a study that actually used solid data and methodology to test those negative assertions. Mobile home communities are also interesting from a criminological theory standpoint because they have historically been characterized by a lower-income and mobile population, two factors that often result in more crime. Conversely, they have historically been characterized by a homogeneous group of residents, which is a factor that often results in less crime. Factor in all of these interesting issues and I was excited to test the amount of crime in mobile home communities.

2. Can you tell me about the homes and communities you looked at?

There is a fairly diverse spectrum of mobile home communities in Omaha, NE. In total, there were 15 communities that covered 32 street blocks in the year 2000, which was when the data were collected. Some of those communities have many rental units, while those at the other end of the spectrum follow the estate model with owned units and land. In other words, they range from fairly dilapidated and poor conditions to very aesthetically pleasing and moderately affluent conditions. Nowadays, a couple of those communities have been torn down or abandoned.

3. Do you know anyone who lives in a manufactured home?

I do. I actually conducted interviews with a small sample of mobile home residents (approximately 20) in 2008. I have another manuscript currently under review that discusses the results from those interviews.

4. You mention that manufactured homes are often placed in blighted areas. Perhaps then it is remarkable the crime rate is on par with other communities.

There are two ways (if not others) to interpret this finding. On one hand, some theorists would agree with your conclusion, given the poor conditions where these communities are often placed. The broken windows perspective, for example, would posit that these dilapidated surroundings would be related to higher rates of crime. Other theorists may still find these rates higher than expected, due to the fact that there is a smaller concentration of people, businesses, traffic, etc., in these areas. In other words, one could argue that there are not a lot of readily available or apparent opportunities for crime in mobile home communities, when, for example, compared to a downtown block with bars, people walking around, businesses etc.

5. Do you think Omaha is a good representation of manufactured home communities elsewhere?

This is a very good question. The City of Omaha has demographics (e.g., income, racial composition) that closely mirror those of the United States. So, Omaha is often viewed as a good representation of the entire country in terms of its demographics. In terms of its mobile home communities, I would not be so certain that it is an excellent representation. My reasoning is that roughly 75% of mobile home communities are in rural areas (and you may have a better estimate of this than I do). The communities that I studied were of course located within the city. One aspect of this study I feel pretty confident about is that the mobile home communities in Omaha were diverse, from the more dilapidated looking parks all the way to the affluent ones and other parks in between. In other words, the average crime frequencies, etc., are somewhere between the extremes, which is what you want.

6. From my experience, manufactured home communities are more dense than many suburbs, often have porches or decks facing the street and so tend to be more neighborly and social. Does that design/architecture impact crime? Could there a kind of Jane Jacobs “eyes on the street” affect at work even here?

Good question. In Omaha, the design of the communities varied. Some of the communities had the decks and other outdoor space that you describe. Other communities did not have such amenities. Generally speaking, guardianship (in the Jacobs mold as you describe) can result in less crime. The variable, however, is how well the residents know one another. If residents know one another, those decks are great. John Doe is sitting on his deck and sees someone who is foraging around an adjacent unit. If he knows his neighbor well, he may realize that person does not belong. His suspicions would be aroused and he may call the police, alert the manager, or say something himself. Conversely, if John does not know his neighbors, he may be clueless about whether that person is up to trouble or is a relative of that person living there. Simply put, manufactured housing communities with a constantly changing population make it more difficult for effective informal social control (or guardianship) to take place. On the other hand, manufactured housing communities that are more stable allow residents to know and recognize one another, which make it easier for them to detect if something is amiss or suspicious.

7. In your opinion, does owning land have impact on the crime rate? On social mobility?

Without a doubt. Numerous studies in criminology have illustrated the importance of home and land ownership for helping decrease the rate of crime. People have a greater stake in their communities when they own something. If the community begins to erode or crime begins to increase, those residents are affected not only in the quality of their lives, but also their home and land value. This study illustrated the same thing in terms of mobile home communities. As the percentage of home ownership increased, the average rate of crime decreased. This finding held for all types of blocks.

In terms of social mobility, the result is the same. Owning an asset helps people move up the social ladder, if they desire. A smaller manufactured home can be sold to pay for a larger one. A manufactured home can be sold to have enough money for a down payment on a site built house, if someone desires. While this study did not test or explore social mobility, this logic has held in numerous other studies.

8. Did you look at any age-restricted communities? If so, what did you find? If not, what would you expect to find?

To the best of my knowledge, none of the communities studied were age restricted in 2000. Given prior research, elderly residents are, of course, less likely to participate or be victimized by crime. As a result, I would expect older communities to have less crime.

9. Does the density of a manufactured home community have any impact on safety?

I am unsure what you mean by safety. Population density is another variable that significantly affects crime. The issue of density seemed to be important in my study as well. When you compare the average raw frequencies of crime in mobile home communities to other types of neighborhoods, mobile home communities come out higher. In other words, mobile home communities, on average, had more crimes reported to police than other types of blocks. When you calculate a RATE of crime (frequency of crime divided by population), however, these differences go away. This suggests that mobile home communities experience higher frequencies of crime because they have more people concentrated in an area.

10. Did you discover anything that may not be related to the research, that you found interesting?

As I mentioned, I have another article under review that discusses the results of the interviews with residents, owners, and managers of mobile home communities in Omaha. One of the key themes seemed to be on-site management. This made a tremendous amount of difference in the quality of life in a mobile home community. I interviewed people from 6 of the 15 communities and I was amazed by how much the parks varied. On the low end, you had problems with fear of crime, gangs, etc. On the high end, you had residents who adored each other, helped each other out, and communicated well with the management structure. Another issue that I found interesting was that some communities have a growing number of minority residents, which has created some problems.

I enjoy studying life and crime in mobile home communities. I have a few additional studies planned. I want to stress that I have no agenda. I really enjoyed working with and talking to residents, owners, and managers. All types of communities have problems and issues and I want my research to help inform people and policy makers about how to make life better in these developments. The reason why I enjoy studying mobile homes is because I am fascinated by that whole “trailer trash” stereotype. I dislike when stereotypes are considered fact. I am a researcher. I like to test various ideas by using actual data and sound methodology.

William P. McCarty is an Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago is an Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago. He received his Ph.D. in criminal justice from the University of Nebraska at Omaha in 2008. His research interests include neighborhoods and crime, correctional staff and management, policing, and quantitative research methods.

by Industry in Focus Reporter Eric Miller for Industry Voices

“Frequently Asked Questions” on HUD Website

August 23rd, 2010 No comments

MHARR logoIn response to numerous inquiries that MHARR has received in recent weeks, industry members should be aware that the HUD manufactured housing program has recently modified the “Frequently Asked Questions” (FAQ) section of its internet website. The FAQ questions and answers now correspond with, repeat and mirror HUD assertions contained in a June 22, 2010 letter to Congress (download copy), which purport to justify and rationalize its failure, over the course of ten years, to fully and properly implement key reform aspects of the Manufactured Housing Improvement Act of 2000.

In the wake of HUD’s June 22, 2010 letter to Congress, which set out a number of new, revised and altered arguments for continuing efforts by program regulators and attorneys to avoid and neutralize the reforms of the 2000 law, Congress requested MHARR to submit a point-by-point response, which the Association did on July 22, 2010 (copy also attached). This response not only refutes HUD’s core arguments on each issue addressed, but also highlights factual errors and incorrect assumptions underlying various HUD positions – such as those pertaining to the crucial role and authority of the Manufactured Housing Consensus Committee (MHCC) – which HUD has systematically downgraded and undermined in recent years.

Because HUD’s June 22, 2010 letter had been directed to Congress, in response to a specific congressional inquiry regarding the implementation of key aspects of the 2000 reform law, MHARR had similarly directed its point-by-point industry response and refutation specifically to Congress. Now, though, that HUD is extensively publicizing the assertions contained in its June 22, 2010 letter – casting those assertions as the supposed final word on the 2000 reform law implementation issues that they address, with no indication that those assertions have been disputed and refuted – industry members and all those with an interest in affordable manufactured housing should be aware that: (1) those assertions and contentions are strongly disputed; (2) that there is an industry response and counter to each of HUD’s assertions; and (3) that HUD Code manufacturers will continue – and will intensify – their efforts to ensure that all such reforms are, in fact, fully and properly implemented, in order to complete the transition of the industry’s homes to legitimate and affordable housing for millions of American families, sharing full parity with all other types of housing.

Therefore, to balance the public record on this matter and to correct any misperceptions that may arise from HUD’s non-acknowledgement of a contrary industry position on each of the issues now addressed in the FAQs, MHARR feels obligated to provide you with a copy of both HUD’s June 22, 2010 letter and the July 22, 2010 industry response to Congress. Please feel free to share the two attached documents with anyone who refers to or raises questions regarding the content of the HUD program website FAQs.

Thank you.

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

Timely Grassroots Engagement with Congress

August 17th, 2010 No comments

MHARR logoWith Congress in recess and with members back in their districts for the balance of the Summer, now is the best time of the year for industry members to seek out, communicate with – and meet – their federal representatives away from the distractions of Washington, D.C. While MHARR is in regular contact with Congress in Washington, D.C. in order to address and advance issues of importance to both the HUD Code industry and consumers of affordable housing, members of Congress are always anxious to hear directly from their constituents on matters that concern them. This is particularly true leading up to the November 2010 mid-term elections, with the control of Congress hanging in the balance.

As a result, grassroots industry members have an outstanding opportunity over the next few weeks to tell their members of Congress directly about the major challenges that the industry faces in Washington, D.C. in key areas, including private and public financing (i.e., the “Duty to Serve” and FHA Title I), and continuing issues affecting the HUD Title VI program, including the deteriorating status and stature of the Manufactured Housing Consensus Committee (MHCC) and the avoidance of – and non-compliance with – required consensus and rulemaking procedures by program regulators on major regulatory issues, such as the ongoing de facto expansion of in-plant regulation.

The common thread running through all of these issues (and many others), that needs to be constantly reinforced with Congress, is that the difficulties the industry faces in Washington, D.C. do not arise from the lack of good laws. To the contrary, Congress has provided the industry with highly beneficial legislation over the past decade, including the Manufactured Housing Improvement Act of 2000, and the “Duty to Serve” and FHA improvement provisions of the Housing and Economic Recovery Act of 2008. Instead, much of the difficulty faced by the industry is a consequence of the failure of relevant federal agencies to fully and properly implement these laws in a manner consistent with the intent of Congress. In large part, this occurs because of the comfort level that regulators routinely get from forces within the industry, or outside the industry, or both.

As many in the industry are rapidly recognizing, given the nature of the problem, the solution does not lie in passing more laws that will similarly be ignored or manipulated. Instead – and as MHARR has already begun to explore – ongoing industry engagement with Congress needs to be expanded to include effective congressional oversight of these matters to ensure that the good laws already on the books are respected and properly implemented by federal regulators. With the industry continuing to decline and with regulators’ continuing resistance to the full and proper implementation of these existing laws – which needlessly exclude consumers from the manufactured housing market – Congress needs to be fully engaged in an oversight capacity. And, the best time to embark on such an approach is right now, with one-on-one meetings of industry members with their congressional representatives, at home, in their districts, to be aggressively followed-up in Washington, D.C. by the industry’s national representatives.

Danny D. Ghorbani
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

An INdustry In Focus Exclusive Interview Report With industry consultant and once interim-president of MHI, DICK ERNST Part Three

August 10th, 2010 No comments

Dick Ernst discusses the SAFE Act and its impact on the Manufactured Housing Industry, and the extent of a potential boost from FHA financing

Reporter Eric Miller with Publisher L.A. ‘Tony’ Kovach for

We conclude the interview begun last week with Dick Ernst.

MHMSM: You just mentioned the SAFE Act. How is that being viewed from inside the mortgage industry?

ERNST: There is lots of confusion. More so, probably, for the manufactured housing business. In the mortgage business, it’s pretty straight forward. I think for the most part, mortgage brokers are being squeezed out because you can’t do the yield spread premiums, charge higher rates to customers with more money going to the broker and things like that. So I think the mortgage brokers are being really squeezed on the mortgage side of the business. But it’s pretty straight forward for the mortgage business. If you operate under a national charter – if you’re a national bank, credit union or thrift – you have to register your people; your people don’t have to be licensed. But the people who go out there and originate loans for you have to be licensed within the state they are doing business with, so you’re dealing with someone who is going to be regulated.

In the manufactured housing business though, it’s much more confusing because of the nature of our business – with some of it being mortgage-type transactions and a large part of it being chattel financing. There are some issues related to the SAFE Act that really make it confusing, in my view, for the average retailer. But in that situation, I believe, the way our business has historically been handled using a retail installment contract or a three-party contract, I think that’s going to be very problematic for the industry going forward because that, technically, makes the dealer a lender and then he assigns that loan to another lender, usually at par value. So, I think that’s going to be problematic and I think our industry is still trying to figure out the right way to handle it.

Community operators, those that we just talked about, that are actually investing in their own paper – I don’t think there’s any question that they are lenders. They are deriving benefit because they are collecting interest on the loan they are providing to the customer. All the other issues related to the administrative aspects of what a retailer does, those to me become more secondary to the bigger issues of, are you getting benefit by earning interest on the loans you are making? Are you, in fact, utilizing a retail installment contract, which represents a loan contract that you are taking to the borrower and then assigning it to someone else? I think all those things are more important issues.

MHMSM: Is becoming licensed difficult? Would that possibly serve the customer better if some of the people in the industry did become licensed?

ERNST: Becoming licensed for people who are involved in the mortgage business is like becoming licensed to begin with, passing your mortgage broker’s license. You have to have certain training and understanding of the mortgage lending laws and what you can do and what you can’t do, and what truth in lending is, or [Real Estate Settlement Procedures Act] RESPA is; the various applicable federal laws and state laws and things of that nature. So you already have a background in it and familiarity with it and you have studied for it to pass your mortgage broker’s license. It’s more difficult for our industry, because typical retailers are not that heavily immersed in mortgage lending and, from what I am told, many of them do have difficulty in passing that license, or passing that test to obtain a license because they are dealing with something they haven’t done before. So I think for our industry, it’s going to continue to be problematic. But if you step back about eight or ten paces from this thing and take a big-view picture of that and say, “Is the customer going to be better-served by having someone who is licensed handling or involved in their loan transaction?” I think the answer is, yes. The real question is: what does mortgage lending have to do with doing a chattel transaction?

TK: Let me jump in here and follow up on the SAFE Act issue because a lot of what we heard at the DC meetings was the shear costs of meeting the SAFE Act requirements. I remember the Texas Association executive director saying that a quick numbers crunch with some of their people came up with a cost of 12 million dollars for licensing, and some small lenders figure it’s going to cost them two million dollars to meet all the requirements. You want to touch on that for a second, how that impacts the industry?

ERNST: From a lender’s perspective, doing business in this industry: Take a company that does business in multiple states. They have to actually have people licensed – anyone who touches that loan transaction, helps to either set payments or underwrite or establish terms on that loan – is going to have to be licensed within that state. Because every state now has their own SAFE Act they were required to put together. So if you have someone operating in multiple states – and let’s say you have loan officers who may get loan business from five, six, seven, eight, nine different states – they’ve got to pass the licensing for all of those. And so the compliance – and I heard one of the major lenders in our industry talk about their expenses like you say – that compliance, that licensing – that’s looking at every aspect of your business to make sure you are doing things properly, because compliance is their second largest expense after personnel. It becomes very costly, because the penalties for violating SAFE Act requirements or regulations can be severe. I think the big fear that most of the industry has is that because of the economic situation, you may have states that see this SAFE Act as a potential revenue generator for them both through the licensing fees as well as the audit fees, and potentially the fines and penalties that might be imposed and collected.

MHMSM: But most state laws are based on the national model, right?

ERNST: They are, but keep in mind, the national model – there’s no final rule that’s been published yet. It’s questionable whether a final rule will be published because the responsibility for the SAFE Act is being transferred from HUD over to the Consumer Protection Bureau, and whether HUD is going to ever issue a final rule or not is in question. Meanwhile, you’ve got states out there that have created their own, based on the information provided initially from the proposed rule from HUD; and keep in mind, those were minimum standards. So the state law had to at least contain the minimum standards provided for in the national SAFE Act that HUD had published. So you see other states that have imposed other things such as brick and mortar requirements. In other words, you have to have a physical office with someone specifically licensed in that facility where records can be stored, where customers can come in if they wanted to, to address issues, whatever it may be. That becomes a very expensive proposition. And then you begin to look at states and say, “Well, how much business am I getting out of there anyway and can I justify having an office there; and if I can’t, then I am going to pull out of the state?” So you’ve got all of those issues. And when you talked earlier about the cost for some, it’s, “What do I have to do to be in compliance in those 46 or 48 states or whatever it may be that I am operating in?”

MHMSM: Right. I could see where that would add to the cost substantially. You once served as interim President for the MHI – when was that?

ERNST: Back in 1998, the last of the big years when we had 373,000 shipments that year. The issues the industry faced then were significantly different. MHI had been trying for a number of years to pass the Manufactured Housing Reform Act, if you will, that addressed issues like installation and licensing and inspections and things of that nature, that really brought some significant issues and updated the HUD code, so to speak. The industry battled and we had conflicting views with MHARR and we couldn’t get anything done. In fact, we had Congress people tell us, “You guys better get your act together before you come back in here because we can’t have divisive opinions from both of you. We don’t know which way to go on this thing, so you better get your act together if you expect to get any help on this at all.”

That was what I would say was one of the positive things that occurred during that period I did serve as interim president. Walt Young was the chairman at that time and Walt directed me to sit down with Danny Ghorbani and meet with him and see if some of our disagreement wasn’t more personality than substantive and if we couldn’t both come together and compromise. We did end up coming together. We formed a coalition with MHARR and had a working group of people that worked in lock step, and we spoke with one voice as an industry for the first time in many years. That helped to get the Manufactured Housing Act of 2000 passed.

The question that’s often asked is: How did we face that issue? And I mentioned earlier that we had a third of our business that had below a 600 FICO score. And everyone likes to have an excuse; and excuse or not, there was an awful lot of Wall Street money, there were a lot of things going on at that time in the industry, a lot of consolidations, a lot of acquisitions going on. Champion Homes was very busy acquiring other companies, acquiring a lot of retail distribution networks – chains, if you will, of retail operations – and creating a really intensive, competitive struggle within the industry. You had other companies then trying to stay ahead of the game with Champion and trying to match them purchase for purchase; a lot of Wall Street money chasing the industry saying these securitizations are great, get us more, get us more, and people saw the acquisition of a chain of retail operations as a way to cement their ability to generate a lot of retail paper and more securitizations. As a result, underwriting went away pretty much. I remember lenders were paying as much as five points for a transaction to a retailer – and that’s to buy a 600 FICO score customer – and they were paying the retailer five points. That’s just not sustainable. It all came crashing down. Repossessions started occurring with great frequency and it became very difficult.

MHMSM: It seems to me manufactured housing can now be positioned as quality housing you can afford, unlike the so called site-built McMansions that too many couldn’t afford; but there’s talk the Obama administration may begin to look away from promoting and subsidizing homeownership in favor of pushing the rental housing market. Shouldn’t manufactured housing be positioned as an alternative to both? How can we move our message ahead the most rapidly and effectively?

ERNST: I think it should be positioned and I’ve often questioned in my own mind – you know, we like to claim that we’re the only form of non-subsidized housing. I don’t know if that’s a good thing or a bad thing. It’s always been touted as being a good thing, but at the same time, if you’re not a part of the government’s plans for providing or assisting people with housing, then that kind of puts you on the outside. I agree with you that the industry should position itself as a home that you can afford. You don’t always have to rent. But I think, and this is just a personal opinion, I still think that we’ve got to improve our image, and perhaps even the architectural appeal of our homes, so that they are more broadly accepted by what I will call the traditional home buyer. I think there are people who look for manufactured homes or who buy manufactured homes because they think that’s the only thing they can afford. At the same time, those same people may have had a manufactured home before or maybe currently live in one.

So I think that we’ve got to broaden our appeal. I think that we’ve got to offer good quality affordable lifestyles, whether it’s in a land-lease community or provide an architecturally comparable home for someone who wants to put it on a piece of real estate. And I think until we do that and can get the opportunity for urban and suburban placement of homes, because architecturally they are compatible with all other homes, I think that’s when we’ll begin to see a broader acceptance and a broader capability of maybe doing suburban developments with homes that just happen to be built in a factory, but they look like everything else.

MHMSM: You mentioned urban. I haven’t heard of many instances where there’s any of that. Is that a potential market for manufactured housing?

ERNST: There have been situations. In California, in Oakland and other places; there was one, I think, in Louisville and in Maryland and other places where non-profit groups actually did urban infill projects where there are a bunch of empty lots; and they had to change the architectural characteristics of the home for them to be compatible with surrounding products.

Also in Cincinnati; I remember Dan Rolfes did the project in Cincinnati. He worked with the mayor and several manufacturers and they did some gorgeous homes. Some of them were modular and some of them were manufactured. None of them looked like a mobile home. They all looked like houses and they were very compatible; they were really a little bit nicer than their surrounding properties, because it was in a much older area of the city. The experience from those has been that those homes have appreciated; they were very favorably priced, and it provided a place where young professionals could purchase a home, be close to the city, be close to the ballparks – that type of thing – without having to commute 30-40 miles.

MHMSM: Is there anything else you would like to share?

ERNST: I do want to clear up and offer what I think are some potential positives. The industry can get mired down in negatives pretty easily. We’ve been mired in negatives for a long time. I really think there’s an opportunity to have good open dialogue and meeting with people, at least at FHA, which I think could be a critical component of the whole finance picture for our industry. If we have a source, an insured source, who consistently… now just think about this for a moment. If we have a source, even with some tightened underwriting through the existing FHA guidelines, that will permit lenders to do the 620 to 660 or 680 FICO score customer, you could have local banks, you might even have regional banks or others, make those loans where they are not participating in the market at all. I think that ultimately then, that will help the over-all industry because I think it will make available an insured loan product. And I think that’s an important part of it, too, because if you have community banks or someone like that making a loan that’s insured by FHA, if they do have to repossess the home, then their loss will be contained to an affordable loss as opposed to one that might be fifty percent of the unpaid balance.

I’ve worked with community banks, and once a board of directors sees a loss where you might lose 50 percent of an unpaid principal balance on a particular home, the next action is, “We’re not doing any more of those.” So I think this could open the door for some portfolio lenders who say, “Ok, I could do a couple million dollars worth of those, or five million dollars worth of those; we’re going to be insured, and we can still buy decent quality paper in there if we service it properly.” That’s one thing. And we mentioned to FHA that I think it would be very helpful if the industry and MHI in some way could help FHA create some sort of an educational program for new or prospective lenders in the Title I program, and even Title II, to educate them about our industry and about our home products and give them the tools they need to be successful in it. We don’t need any more failures in this business.

TK: I agree with that. You kind of touched on something indirectly right there if you’ve got an extra minute. Part of what FHA was setting up was this “ten million dollars plus ten percent.” What do you see happening to that?

ERNST: Well, I personally thought it was an overreach, that it was excessive. Because some of the best lenders in the industry, those that have been successful – and I’ll use Triad as an example – while they may meet the ten million dollar net worth requirements, the additional ten percent of all the outstanding securities that they issue is very onerous. Because if you operate in 45 states or however many they operate in, and if you did an additional 300 million dollars a year in FHA business, that’s an additional 30 million dollars in net worth that you’ve got to have. So now all of a sudden, your net worth requirement goes up to 40 million. That’s just too onerous. What we tried to do is demonstrate to them that that’s not necessary. We went back to them and said no, the average loss on these homes for the lender, while it may not be ten percent – it’s more like 15 percent.

There are some capped expenses that FHA has: they’ll only pay $1,000 per section to move a house (it may cost $1800 per section to move it); they’ll only pay seven percent commission on the sale of a repossession. You know, seven percent on a $50,000 deal is not a lot of money, and you’re sure not going to get a lot of people interested. The standard is more like ten percent, so there’s additional exposure for the lender.

If their actual loss experience is fifteen percent, the ten percent additional is still an overreach. It’s up to us to prove that’s what the lender’s actual loss exposure is. Vicki [Bott] commented that their data reflected that it was closer to 30-40 percent; I think that’s what she said. Well, if it’s 30-40 percent, then there may be a reason to have those excess net worth requirements. I don’t believe that they are. And the unfortunate thing [about those statistics] is that really, the only the only people involved in FHA Title I financing have been Vanderbilt and 21st Mortgage to any degree over the last five to seven years, and they haven’t done a lot of it. Everything else they have is so old and really not even applicable to today’s marketplace and the way people do business. And there’s more of a distressed marketplace situation. I don’t believe it’s appropriate to use those numbers or that they are applicable, but we’ve got to be able to demonstrate that we’ve got some more recent history and some more recent data that says it’s closer to 15 percent. Then we can demonstrate that maybe they can relax the rules to some degree. I’m also working on some other things that I’m not at liberty to talk about that might be another approach on that.

TK: One last question after the one last question. How much of a bump do you think a successful FHA program would represent to the industry in terms of shipments? We’ve seen a lot of numbers on that. What would your take be?

ERNST: Well, I know there’s a lot of disagreement with this and people are going to say, “He’s nuts.” I think there could be a 10-15 percent bump in shipments. That’s 5,000-7,500 shipments, because of the ability to reach the heart of the industry’s customer, the 620-660 or 680 FICO score customer. That being said, there are a lot of other things that have to be right in the marketplace, too. Right now in a lot of areas, we’re still seeing excess inventory of site built homes, a lot of foreclosed homes, a lot of deep discounts on those properties – and that still represents competition. And we’re still looking at a lot of uncertainly in economic times. That’s keeping people from being [at] the sales center and looking to buy. Another important point is that there are going to be a lot of homeowners out there who have the scar on their credit reports of having had a foreclosure. If everything else – income, job stability, all the rest of the situation – is good for a customer, how is FHA going to look at that? We don’t know.

TK: That’s a great point. Dick, thank you so much. Eric do you have anything else?

MHMSM: No, that was a lot of great information.

TK: I want to really thank you personally for your time and all this expert insight. It was very valuable and I think the industry will appreciate it.

ERNST: Well you’re welcome and I hope it’s helpful and I hope you don’t get too [much] criticism of it.

TK: A little bit of criticism is a good thing. I think this is going to be well-received and just outstanding material. Thanks so much.

This concludes our three-part series of an Exclusive Interview Report with industry consultant and once interim-president of MHI, DICK ERNST.

An INdustry in Focus Exclusive Interview Report with industry consultant and once interim-president of MHI, DICK ERNST, Part Two

August 8th, 2010 1 comment

Dick Ernst Discusses Duty to Serve amidst the future of Fannie and Freddie and the potential return of private financing
Reporter Eric Miller with Publisher L.A. ‘Tony’ Kovach for

We continue with the interview begun last week with Dick Ernst.

MHMSM: Even for Industry pros, there can be confusion with all the terminology, agencies, etc. Do you have a simple way or suggestion to help readers keep it all straight?

ERNST: I agree with the fact that it’s confusing. We’ve seen that recently in a couple of other blogs that were published. FHA is the Federal Housing Administration and it’s been around for years. The FHFA is the conservator for Fannie Mae and Freddie Mac and it was just recently put together to act as a conservator on behalf of the government. It deals only on the mortgage side of the business with Fannie and Freddie.

MHMSM: Will the FHFA go away when the future of Fannie Mae and Freddie Mac are determined?

ERNST: That is to be determined and I would expect that it probably would. I think it’s anybody’s guess right now. I don’t believe Washington really knows what’s going to happen to Fannie and Freddie; they still have huge issues and huge problems to work through. We’ve all seen the anticipated losses that the taxpayers are going to have to eat as a result of their involvement. I think there will be some privatization of that business, but the mortgaged-backed security market has to be alive and well and thriving. I think that there will be a continuing government role in some form of providing a marketplace, and it might focus on the low- to middle- and moderate-income families and affordable housing. That might be a better spot for them to play in. But it’s still too early to tell what’s going to happen to Fannie and Freddie and what role the government is going to play going forward, and whether FHFA continues to exist.

MHMSM: Any thoughts on the GSE’s Duty to Serve and how it can be enforced? Do you think the conservatorship excuse they have given holds water legally? If not, why not?

ERNST: There is a legal question and a practical question to be asked. Legally they are under an obligation, a legislative obligation, to create programs and it’s only enforceable to the extent that Congress is willing to hold their feet to the fire and say, “Look, you guys have an obligation to provide loan products to this industry because you’re only providing less than one percent of the financing that occurs when this segment of the housing market has historically averaged about 20 percent of the new single-family housing market. So it’s woefully underserved, and we passed legislation specifically for you to address it.”

That being said, the practical side of it is, who is going to put the pressure on it. Politically it could be suicidal because of the massive losses that Fannie and Freddie are taking. They would be saying “Oh, now we want you to go into this area of business even though there are some historical facts that this may have a higher default rate than what you are comfortable with.” I don’t think there’s many Congress people, including those on the housing finance committee, that really want to tackle this head on and hold Fannie and Freddie’s feet to the fire to say, “You’ve got to offer chattel financing, you’ve got to do this and you’ve got to do that.” There may be legislation there, but we’ve seen from a legal standpoint, obligations that the federal government has legislatively that they are just unwilling to address because of the potential political problems that exist for it.

MHMSM: Do you think that will be more palatable to address after they exit conservatorship, if that’s what happens?

ERNST: I think our industry is taking the right approach. We’ve always been big supporters of Fannie and Freddie, I guess in hope that they would step up to the plate and fill that Duty to Serve, and offer more programs and opportunities for a secondary market. We’ve made it clear to both agencies and the FHFA that the industry is willing to talk about skin in the game, talk about minimum credit qualities, talk about minimum equity requirements and have a good sustainable program. I don’t know that they’ve got the stomach at this point right now to take on something new. I think they’re overwhelmed with the size of the problems they have right now. That takes up the bulk of their time.

Once they’ve exited, I think we have to keep an open mind and say, “What is their obligation, what is their duty now to the housing industry, and what’s the role and how can we work within that?” I think the industry is taking the right approach to say, “Look, we’re not going to come out and say anything negatively against the agencies in terms of whether they should exist or not exist.” We continue to be hopeful that at some point it will provide us a source. We’re certainly not going to say anything about “take ’em private and the government should get out of this business” because I think that it’s a marketplace the government has to play some role in; we just don’t know how big or how much.

MHMSM: What are some of the biggest barriers to providing chattel loan financing privately? How can the Industry move beyond some of the past history of experiences like Conseco?

ERNST: Right now there is no asset-backed securities market. Chattel financing, up until the credit crunch occurred, was predominantly either being funded by portfolio lenders, or the asset-backed securities market was still providing some. I’ve got to back up a little bit here. Clayton Homes’ Vanderbilt Mortgage and 21st Mortgage were both big players in the asset-backed securities market until the early 2000s; and then when the cost of securitization became so expensive, they felt their own existence being threatened because of the cost.

I can remember in the early 2000s where if someone had a billion dollars worth of securities to go to market, they wanted securitization for a billion dollars worth of manufactured housing loans, they had to come up with an additional 200 million dollars in over collateralization to get that deal done. There aren’t very many companies in this industry that could withstand that for any period of time because if you have to do that for two to three years, then all of a sudden, you’re talking about $600 million dollars in additional over collateralization, and a lot of companies didn’t have that kind of excess capital or excess assets.

The landscape changed dramatically for our industry after the blow-up, if you will, of the sub-prime credit purchases that we were doing in the mid to late 1990s, and I think it’s changed pretty dramatically, and I really don’t see it getting back to where it was. I think the asset-backed securities market will come back, but I think the disciplines many lenders have in their portfolio will open up an opportunity to do some securitizations, because the credit quality is so high and the default experience has been very good on that higher-credit-quality customer.

MHMSM: Will there be a process and what will the process be for public finance returning as an option?

ERNST: The process is a comfort level in the capital markets. I’m sure you’ve read where there’s beginning to be some opening up in the mortgage-backed securities market as well as some asset-backed securities classes like automobiles and other things like that, where there are some asset-backed securities deals being done. Slowly I think, because of demand or the need to invest capital, I think that ultimately there will be that opportunity to do some asset-backed securities with some pretty high-quality manufactured housing loans. Some of the more recent loans that were securitized by Countryplace Mortgage and Origin, some of those had average FICO scores of more than 700. It was pretty high-quality and for the most part, those have performed very well. I think it’s a matter of investor confidence and sitting on a lot of extra capital right now that they need to get invested; but they want to invest it in something that’s going to have predictable returns and a predictable experience.

MHMSM: The manufactured housing industry experienced an easy-money, no-credit-score bubble in the late 1990s. That was repeated more recently in the site-built housing industry. Have we learned our lessons? What are those lessons?

ERNST: Who do you mean by “we”? If you’re talking about the manufactured housing industry, I’d say absolutely we’ve learned our lesson. I think there’s been a lot of slicing and dicing, so to speak, of that business that was purchased prior to 2000 or 2001; and a lot of people looking at the credit quality look at the way business was being done back then.I mean, we got pretty loosey-goosey back in the late ’90; and when I say loosey-goosey, it’s been reported Marty Lavin (who is kind of a statistical nut and likes to look back at things) has indicated that more than a third of the businesses purchased in the late 90s had less than 600 FICO score business.

We know, based on experience now, that that business cannot perform. It’s not a matter of IF it’s going to repossess; it’s a matter of WHEN it’s going to repossess. When you’re dealing with low- to moderate-income customers, they have less leeway to be able to withstand an adverse event in their life, whether it’s an income interruption or whatever it may be; they have fewer assets, fewer reserves and less disposable income to withstand that event. I think we’ve learned.

The survivors do a lot of verifications now: they verify down payments, they verify income, they verify employment, they look very carefully at what the customer’s disposable income is going to be, what their other expenses are, what their family size is – all of those things now, I think, are being looked at a lot more closely. I think that the lower-quality credit customers are just not able to get those loans financed for the most part. If they do, through a company like 21st Mortgage, they’re going to have to have some significant equity in that loan or put up some collateral, perhaps land that they own or something like that, so they have more at risk. I think our industry has learned a lesson.

I can’t speak for the site-built industry. It’s been pretty devastating what’s happened to them. You’d like to think that everyone learns a significant lesson from this, but we all know there are a lot of cyclical events that occur in major markets like this, and we can only hope that everybody has learned a lesson.

MHMSM: What are your thoughts on efforts like Ken Rishel’s to move chattel ahead via establishing captive finance programs, especially for land lease community operators?

ERNST: I think the captive finance entities that Ken works with and a number of community operators that provide financing for their own customers is absolutely through necessity. You have to remember that land-lease communities have two potential benefits. Number one is, they tend not to focus so much on the profitability on the sale of the house. They want it to be profitable to some extent, but there’s less emphasis on the profitability and they want to have a loan that they can put in their portfolio. They’re willing to take a little bit more credit risk because they have much more control of that individual transaction with the site manager who can monitor what that customer is doing on a monthly basis and look for the signs that they may be having some issues; maybe look out there and see that the guy bought a new motorcycle or whatever it may be. Sometimes those can be things that create difficulty with a loan going forward. I think the captives are by necessity.

At the same time I think the captives in the future – and I don’t know how long in the future – but I think at some point in the future, there will be the ability to securitize those loans with someone with some pretty high leverage, or I should say low leverage. In other words, if you put a billion dollars in loans together, you might be able to re-coupe a half a billion dollars in capital. In other words, you might have to do a two-for-one type of deal because of the potential risk involved. Now, the larger communities – and to the extent they are well capitalized and have access to capital – I think you see folks like Hometown America and others who have done that and done it successfully, believe it’s necessary for their business model to support the communities, to create revenue-generating customers, revenue from those lots that they lease, and they think it’s important. At the same time, they’d love to be able to securitize those loans so that they don’t have all that capital tied up.

I think it’s going to continue; and the numbers that have been published – I have seen both from George Allen and others, and Tony’s numbers – indicate anywhere from three and a half billion to as much as six or seven billion dollars worth of paper that’s being held by these community owners. I do think the SAFE Act is going to cause everybody take a look at that and make sure they are doing business the right way; but at the same time, the captives are a necessary part of their business model.

Be sure to catch the third part of the exclusive report with Dick Ernst when we discuss the SAFE Act and its impact on the Manufactured Housing industry and the extent of a potential boost from FHA financing.

Click for Part Three of this interview

Putting the Right Pieces in Place

August 5th, 2010 1 comment

By Danny D. Ghorbani

MHARR logoThe first step in solving a problem — any problem — is admitting to yourself that there is a problem, that the problem is real and that it exists. The second step, and perhaps the most difficult, is to accurately assess and define the problem, so that one or more potential solutions can be considered, weighed and, ultimately, implemented.

By any objective measure, the HUD Code manufactured housing industry has a problem. Over more than ten years, production and sales have plummeted. From a modern high of more than 373,000 homes in 1998, production in 2009 fell to below 50,000 homes. The trend in the statistics, moreover, has been steadily downward, and appears — over the long-term — to transcend both positive and negative changes in the broader economy and the broader housing market. No amount of happy talk or glad-handing can paper over this fundamental fact — the status quo for the industry and its consumers is unacceptable, and must be changed.

But that is the easy part. The more difficult part is defining the problem as an avenue to arriving at solution(s) that will work. To start, we can identify what is not a problem — and that is our relations, as an industry, with Congress and the lawmakers in Washington, D.C., who pass the laws that govern our comprehensive regulation by HUD and the finance programs and entities that impact the ability of lower and moderate-income Americans to purchase industry products that they can afford without costly subsidies.

The track record of the industry and its representation in Washington, D.C. within this realm is quite good, and the reason is very simple — manufactured housing and the manufactured housing industry are favored by legislators in Congress. And for good reason. The industry provides jobs that will stay here in America, without outsourcing. The jobs that the industry provides are well-paying manufacturing jobs, typically located in the heartland of the country, where the success or failure of the broader economy is largely determined. The industry, moreover, produces homes that provide affordable home-ownership for American families at all income levels without tax-funded subsidies. The industry, therefore, provides a vital resource — affordable home-ownership — without asking for tax dollars, only parity with other types of housing in various government housing programs, such as FHA programs.

So, Congress has been good to the industry. In 2000, it passed the Manufactured Housing Improvement Act, to take manufactured housing into the 21st century and complete its legal and policy transition to the legitimate housing. In 2008, aware of the trouble that consumers were having with financing, Congress included two critical manufactured housing provisions in the Housing and Economic Recovery Act of 2008 (HERA) — the “duty to serve underserved markets,” designed to expand and improve private financing and end discrimination against manufactured housing by the Government Sponsored Enterprises (GSEs), and FHA Title I and Title II improvements, designed to expand and improve public financing for manufactured homes financed as chattel, real estate and as part of land-home packages.

These are all good laws, designed to promote the availability and use of affordable manufactured homes. These laws should have fostered an industry boom in the solid national economy of the years following 2000 — with an industry expansion involving hundreds of thousands of homes — and should be helping to foster an industry revival now, in a post-recession economy. At least that was the hope — and the theory. But, things have gone wrong, and therein lies the problem.

The problem is that none of these good laws are being implemented in the way that Congress wanted, and expected. The 2000 reform law has been gutted by HUD regulators and attorneys. There is no — and has been — no appointed program Administrator for most of the past ten years. Enhanced preemption has never been implemented. The MHCC — the real centerpiece of the 2000 law — is being turned into another rubber-stamp “advisory council.” Its proceedings have been taken over by program regulators and a large chunk of its authority was taken away when HUD — without any public comment — read catchall section 604(b)(6) out of the law, which required HUD to bring enforcement policy and practice changes to the Committee.

HERA-based FHA Title I improvements have fared no better. Inexplicably delayed for years, those improvements are now finally being implemented, but their impact appears likely to be minimized by recently announced Ginnie Mae requirements for the securitization of new Title I loans ($10 million minimum adjusted net worth plus 10% of outstanding manufactured housing mortgage-backed securities) that will severely restrict access to the program by the new lenders that will be needed to appreciably increase the availability and number of manufactured housing loans for consumers.

Similarly, the proposed rule to implement DTS published on June 7, 2010, represents a major disconnect with the intent and objectives of Congress that, if implemented, will predictably fall well short in helping to end the discrimination against manufactured homes by the GSEs, that lies at the root of the current near-unavailability of manufactured home financing.

Despite good relations with Congress, then, and good laws passed for the benefit of the industry and its consumers, the results have not matched expectations. The implementation of each of these laws, by relevant federal agencies, has not come even close to what Congress wanted. And in certain respects, these agencies are openly defying clear congressional directives.

The pattern, therefore, is clear. Congress tries to help the industry and, then … nothing — or close to nothing or, sometimes, worse than nothing. For an industry that is comprehensively regulated by the federal government and, thus, thrives or declines based on decisions made in Washington, D.C., this is — and has been — a prescription for trouble. As an industry, we have an obligation, to ourselves and to our consumers, to question — to ask why this is happening, and how it can be fixed before much of the industry falls by the wayside, leaving only a handful of survivors. MHARR is asked constantly why the industry is so impotent in Washington, D.C. in the face of continual resistance by regulators and other administrative types to the proper implementation of the good laws that Congress provides us. MHARR , in response, has studied this issue, going back over the history of the industry’s presence and involvement in Washington, D.C., dating back to the start of federal regulation, to find workable solutions, and will share its findings and suggestions in the September 2010 MHARR Viewpoint.

In MHARR’s view, the industry’s inability to implement critical laws despite strong Congressional support lies at the core of the industry’s difficulties, and needs to be addressed decisively.

MHARR is a Washington D.C.-based national trade association representing the views and interests of federally-regulated manufactured housing.

An INdustry In Focus Exclusive Interview Report With industry consultant and once interim-president of MHI, Dick Ernst, Part One

August 4th, 2010 No comments

Reporter Eric Miller with Publisher L.A. ‘Tony’ Kovach for

MHMSM: To help us set the stage for this interview, please tell us about your role at Finmark and how you and your firm serve the Manufactured Housing Industry.

ERNST: Finmark is a shortened version of Financial Marketing Associates. It’s a company I formed in 1983. When I first got into the manufactured housing industry and I started my own company, we represented banks and savings-and-loans and originated manufactured housing loans for them. Eventually, it’s evolved into my doing consulting work predominantly now, and putting together outside-the-box type transactions.

Some of the unique things I have done are a joint venture mortgage operation between three manufacturers and Wells-Fargo, and ran that operation for about three years. I also put together Countryplace Mortgage for Palm Harbor Homes 14 or 15 years ago now. I helped Textron create a commercial construction mortgage loan program and was working on a consumer program for them when the financial meltdown occurred and they decided not to move forward with it, and ultimately decided to get out of the manufactured housing inventory finance business as well.

The work I do is all related to the manufactured housing business. I like to put special deals together and provide consulting to manufacturers, retailing groups or finance entities that makes their projects possible.

MHMSM: What is the “big picture” to take away from the June 2nd Elkhart meeting?

ERNST: Many times the big picture gets missed based on individual comments and interpretations of how the meeting went. There are a couple of big picture take-aways from that meeting. One is, I found Dave Stevens, the FHA Commissioner, and members of his staff to be very open and candid about their willingness to work with the industry and help craft a program that can be sustained. I don’t think there’s any question that the FHA believes clearly that manufactured housing has a very important role to play in providing affordable housing to people in this country.

The issue that they have to deal with – and I think this goes beyond manufactured housing – is they have a very difficult task of reigning in the FHA mission of being the lender of last resort for low-end, low-quality credit customers to being a viable source of financing for qualified customers. They may run a broader spectrum than what Fannie Mae and Freddie Mac have done, but I really believe they want to play a serious role with Ginnie Mae to provide a good source of FHA insurance and have Ginnie Mae provide that secondary market for our industry.

I think we have some very smart people with extensive mortgage backgrounds willing to sit down, engage with us, understand our business better and work with us to craft a program that’s going to be sustainable.

The other take-away is that FHFA now is the only entity that we’re able to talk to with respect to Fannie and Freddie. It’s clear to me that they are using their conservatorship as another convenient excuse not to tackle something they have been directed to do through the Duty to Serve legislation. They are using their conservatorship and all of the other problems that they have in order to pretty much stay away from our industry. That’s a sad situation.

MHMSM: What is the big picture take-away from the follow-up at the MHI Summer Meeting with Vicki Bott [Deputy Assistant Secretary HUD] and other Industry and public officials?

ERNST: The Washington meeting came about as a result of FHA reaching out and saying we would like to put together a working group of lenders and interested parties who can help us understand your business – the way you originate it, the way you service it, the repossession and disposal characteristics – and understand your business better so we can address those things properly and still have a sustainable program.

Vicki mentioned that at some point in the not-too-distant future. they’re going to be sending out a TI letter to all mortgage lenders that are operating in the FHA space that anything below a 580 FICO score is going to require a ten percent down payment. That’s a huge jump for FHA because the current regulations require it to be anything below a 500 FICO score. From 500 to 580 – that should be a clear message that FHA is taking these defaults and delinquencies very seriously and they really believe they have to pay a lot more attention to the underwriting side of the business instead of being the lender of last resort.

Again, the take-away from that meeting is she came prepared. She brought several members of her staff. I wasn’t really expecting that. I thought there would maybe be one or two people, but she brought in four or five people including her head appraiser, because there can be appraisal issues and concerns about the program. They had specific questions in areas that they wanted to explore and get feedback from the industry.

I was very pleased with the quality of the meeting, the quality of the questions, the openness of our membership, the lenders who were involved and I’ve seen in some previous blogs comments that the people around the table were “the survivors” – and there is a lot of truth in that. The survivors weren’t the guys doing the bad acting in the late 90s that created some of the housing problems we had in the early 2000s.

I appreciated their candor. For the first time ever, when Bob Ryan, their risk officer… I mean that in itself has got to be amazing to people who track FHA. FHA has a risk officer. That’s pretty astounding to know that with billions and billions of dollars in mortgages that they’re insuring, and they’ve never had a risk officer before to assess what type of risk they are taking on and whether or not programs for site-built are sustainable as well. So when they came to us and said not only are you battling some perception issues, you’re also battling some real issues.

When provided some material on FHA Title II that the serious delinquent accounts, the number of defaults, 30, 60 or 90 day delinquents, all pretty much doubled the site-built business – the rates were double what the site-built business was, that’s a real problem. And it’s a problem our industry has to respond to and say we do need to tweak this program and make it actuarially sound and there are things both of us can do to make it work.

MHMSM: Vicki Bott comes to HUD with a Mortgage Background, Right?

ERNST: That’s correct. She came from Wells Fargo. She’s a very bright lady with a very inquisitive mind. The interaction I saw with her is “she gets it.” When someone responds to her, we’ve seen others that pretended they got it, but they didn’t really have much of a clue what we were talking about. I think that she really gets it from the depth of experience she has from her mortgage background.

MHMSM: If I’m just an average voter out there, I might listen to this and say if you have the qualified borrowers, why can’t the private market handle them? Doesn’t all this stuff exist because we want to allow people who maybe aren’t as qualified to have a home?

ERNST: I don’t think that’s it. It’s potentially a conflict and the way the FHA conventionally has been viewed as providing the opportunity for someone to get a home who wouldn’t otherwise qualify for a conventional program.

But I think you do that in a couple of different ways. The conventional programs from Fannie and Freddie, and even those from private institutions typically require 5, 10 or 20 percent down; and because of the private mortgage restrictions, those having higher credit scores are usually the only ones able to qualify. Does that mean that everyone else is unable to qualify? I don’t think that it does.

I made the comment during that Washington meeting that I believe the heart of our industry, that is the people who buy manufactured housing, typically will have between a 620 and 660 FICO score business. Those private companies that are in the marketplace today, with the exception of 21st Mortgage and perhaps Vanderbilt because of their funding capabilities with Berkshire Hathaway, the bulk of the companies are buying 680 plus FICO score business; and while they may do some with five percent down, they’re going to have to have a higher FICO score for the most part. The 620 to 680 FICO score customer is still a legitimate customer capable of buying a manufactured home and they deserve an opportunity for financing.

The other way FHA permits financing opportunities for those customers, is with a five percent down payment. Because a lot of those loans can be securitized with Ginnie Mae, the interest rates charged to the borrowers are actually going to be more advantageous than some of the conventional money or portfolio money that’s out there today. As a result of that, it provides a nice window for FHA to provide a way for people to buy homes that maybe aren’t being served today in most of the conventional markets for manufactured housing.

And I think provides a tremendous opportunity for our industry, for people in the land-lease communities as well. I think it gives them a potential source of financing because I really see the Title I program for chattel financing focusing more in the 600 or 620 to 680; and then to the extent that higher credit quality customers would drift toward an FHA loan, they would do so because of the interest rates or the down payment situation.

Be sure to catch the second part of the exclusive report with Dick Ernst when we discuss the future of Fannie Mae and Freddie Mac, the recent housing bubble, the SAFE Act and its impact on the Manufactured Housing industry and more.

Click for Part Two of this interview

Action Needed: Contact Senators and Request they Support S. 1320

August 3rd, 2010 No comments

On Thursday, August 5, the Senate Energy and Natural Resources Committee will mark up a number of energy bills. Included in the mark up is the Energy Efficient Manufactured Housing Act (S. 1320) sponsored by Sen. Jon Tester (D-MT). Assistance is needed from MHI members to ensure the committee favorably reports the measure.


MHI members with Senators serving on the Energy and Natural Resources Committee are urged to personally contact their offices and ask them to vote in favor of S. 1320. A list of the Energy Committee members is below. In addition, Senators should be urged to contact both Democratic and Republican Senate leaders to request the Energy Efficient Manufactured Housing Act be included as part of any energy legislation or job creation measure the chamber may be developing. Contact Rae Ann Bevington at 703-558-0675 or for additional information.


In March 2009, Rep. Baron Hill (D-IN) introduced the Energy Efficient Manufactured Housing Act (H.R. 1749). Companion legislation (S. 1320) was introduced in the Senate by Senator Jon Tester (D-MT) on June 22, 2009.

On May 6, 2010, the House of Representatives adopted a broad-scale home energy retrofit bill (Home Star Energy Retrofit Act of 2010; HR 5019), which includes amended provisions from the Energy Efficient Manufactured Housing Act. The legislation was referred to the Energy & Natural Resources Committee for consideration.

Both bills authorize the Department of Energy (DOE) to make grants to states to provide owners of manufactured homes constructed prior to 1976 with a one-time only rebate of up to $7,500 to use towards the purchase of a new Energy Star qualified manufactured home. To cover the additional cost of removing and recycling the old home an additional grant of up to $2,500 to be provided upon proof of decommissioning. To be eligible, home owners could not have a total household income in excess of 200 percent of an area’s poverty level. The legislation permits replacement of substandard mobile homes with ENERGY STAR homes as an eligible use of up to $6,500 of the American Recovery and Renewal Act Weatherization Assistance Program funds. Current law forbids weatherization funds from being used for replacement.


Members of Congress are asked to endorse the Energy Efficient Manufactured Housing Act (H.R. 1749 & S. 1320) for the following reasons:

  • The program would provide resources for low-income homeowners to purchase new energy efficient homes and help dispose of outdated homes and improve living standards for potentially millions of families
  • Households participating in the program could save an average of $1,800 per year in energy costs, which could be used to help offset monthly home expenses and help build equity in a home
  • Each new manufactured home constructed creates more than one new American job; the measure could potentially create more than 51,000 high-quality U.S jobs over the next three years and generate more than $8 billion in construction related spending
  • The improved efficiency of an Energy Star home would reduce household carbon emissions by nine tons per household per year and a total reduction of 1.4 million tons of greenhouse gas emissions per year



Chairman Jeff Bingaman (NM) (202) 224-5521

Byron L. Dorgan (ND) (202) 224-2551

Ron Wyden (OR) (202) 224-5244

Tim Johnson (SD) (202) 224-5842

Mary L. Landrieu (LA) (202) 224-5824

Maria Cantwell (WA) (202) 224-3441

Robert Menendez (NJ) (202) 224-4744

Blanche Lincoln (AR) (202) 224-4843

Bernard Sanders (I) (VT) (202) 224-5141

Evan Bayh (IN) (202) 224-5623

Debbie Stabenow (MI) (202) 224-4822

Mark Udall (CO) (202) 224-5941

Jeanne Shaheen (NH) (202) 224-2841


Lisa Murkowski (AK) (202) 224-6665

Richard Burr (NC) (202) 224-3154

John Barrasso (WY) (202) 224-6441

Sam Brownback (KS) (202) 224-6521

James E. Risch (ID) (202) 224-2752

John McCain (AZ) (202) 224-2235

Robert Bennett (UT) (202) 224-5444

Jim Bunning (KY) (202) 224-4343

Jeff Sessions (AL) (202) 224-4124

Bob Corker (TN) (202) 224-3344

MHARR Comments on Proposed On-Site Rule

July 29th, 2010 1 comment

MHARR logoAttached, for your information, review and use, are MHARR’s comprehensive comments in response to the proposed rule on “On-Site Completion of Construction of Manufactured Homes” published by HUD on June 23, 2010. MHARR, as with its comments on proposed rules concerning the “Duty to Serve Underserved Markets” and “Test Procedures for Roof Trusses”, has prepared and filed these comments at an early stage in the rulemaking process so that they are available as a model, basis, or support, as needed, for individual comments filed by industry members. Comments in response to the proposed rule must be filed no later than August 23, 2010. A copy of the proposed rule can be downloaded for your convenience.

As the attached comments indicate, MHARR supports the proposed rule, but with significant conditions attached, that involve key clarifications and modifications of the rule as proposed. Simply put, on-site completion under this rule could either be extremely beneficial for the industry and its consumers, or could backfire on both. If properly finalized and implemented by HUD, with the clarifications and modifications identified by MHARR, a timely, cost-effective on-site completion process could expand existing markets for the industry and open new ones. Conversely, if the industry does not provide HUD with the input that it needs to develop such a proper final rule, and the final published rule does not contain the necessary clarifications and modifications, the on-site process could actually do more harm than good, leaving the industry and consumers with no choice but to oppose the final rule.

Consequently, it is important that industry members review and familiarize themselves both with the proposed rule and with MHARR’s comprehensive comments and submit their own individual comments accordingly.

MHARR extends its thanks and gratitude to the industry members and, particularly, the manufacturer regulatory, legal and technical executives, and retailers, who were instrumental in analyzing the proposed HUD rule and assisting MHARR in the development of its attached comments.

MHARR will continue to keep you apprised as this rulemaking process advances.

Download – MHARR Comments on Proposed On-Site Rule

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

An INdustry In Focus Interview Report with the Honorable Congressman Walter Jones (R-NC3)

July 21st, 2010 6 comments
Eric Miller Industry in Focus Reports

by Eric Miller with L. A. ‘Tony’ Kovach for

MHMSM: Congressman Jones, we want to thank you for taking this opportunity to share your views on Manufactured Housing Industry related issues with us. Tony had a good time talking with you last week at the MHI Industry Reception in Washington, DC.

WJ: Thank you. I enjoyed it myself and I am delighted to talk to you and have this opportunity. I think you know I’ve been asked to co-sponsor the licensing clarification act and I am now a co-sponsor.

MHMSM: How important is the manufactured housing industry in terms of employment and providing affordable housing to North Carolina and the country in general?

Rep. Walter B. Jones (R-NC-3) PhotoWJ: I have always felt that affordable housing is important to almost any area. Because people work hard to make a living, we certainly want them to have the opportunity to have adequate and appealing housing. It’s been one of my beliefs for years and years, long before I came to Congress. To me, if a family or an individual desires to have their own home, I think the availability is what’s important.

As we discussed last week at the reception, unemployment is a grave concern. As we have more and more unemployment, it’s impacting the industry as well. By creating the financial and other channels needed for prospective home buyers to purchase today’s quality manufactured housing, we can also create or sustain more employment for American workers. Each of these is important to North Carolina and to our Nation.

MHMSM: We are all interested in good government. The current situation with FHFA and the Duty to Serve provisions demonstrates how the intent of Congress can be hampered by regulators. The biggest problem in the manufactured housing industry today is a lack of reasonable retail financing, especially home-only financing which is about 60% of all Industry finance transactions. Congress passed the Duty to Serve provisions two years ago, but many in the industry say they’ve not been properly implemented, and personal property financing is still largely unavailable. What can we or the Congress do to get the FHFA and the GSE’s to provide home-only financing to help make affordable manufactured homes accessible?

WJ: When I met with a representative of MHI last week, he brought such issues to my attention; that’s why I went onto [Congressman] Joe Donnelly’s bill, because whenever Congress passes laws where agencies institute regulations, many times there are unintended consequences. As a legislator, what you are seeking is to try to help a given situation. As it was brought to my attention, here we are with a multitude of regulations that at this point aren’t carrying forward the intent of the Congress.

I was at Clayton Homes center a few weeks ago with an effort by their Mr. Fox to sign a banner to send over to our troops in Afghanistan and Iraq, something he’s done for at least the last five years. When I was there, I overheard a family who had walked up to sign the banner. But they also said to Mr. Fox, “We really appreciate our home, thank you for helping us finance our home.” In some situations, the way the SAFE Act is being viewed at present, the salesman on the sales lot cannot recommend a financial institution that the family can go to and borrow money to purchase a manufactured home. That is cumbersome for everyone involved, starting with that prospective customer. We need to clarify that with the regulators, because it wasn’t the intent of the SAFE Act law.

Well, as I knew before I came to Congress, not all the financial institutions are into loaning money for manufactured homes. The way I look at this, I know I see the growth and development in the manufactured homes industry and how these homes today are not what they were even 20 years ago. They are quality homes now and homes I would be glad to live in if that were my choice. I know that the respect for manufactured homes is at a whole different level than it was years ago. Financing and regulations should reflect that new reality of the quality of today’s manufactured home.

MHMSM: In another example, Congress with good intent passed the SAFE Act, but this is another piece of legislation that observers say that once it got into the hands of regulators, has had serious unintended consequences. The SAFE Act was designed primarily for the conventional housing and the mortgage industry, but regulators have been interpreting it to apply to manufactured housing. That puts a heavy strain on small mom-and-pop-size businesses, but also larger firms as well. Industry lenders are facing huge costs of compliance. The HR 5369 amendment would exempt MH sales people and community managers from the provisions of the Act. What do you think we can do to move this ahead through the Congress?

WJ: I’m on the bill now. I think you’ve got to educate and go back to States and business leaders. To me, this is of great interest to the person who owns the sales lot, but should also be of interest to local chambers because there are many people who desire to own a manufactured home. I think education back home in the States where we have these manufactured homes being sold is an important step. They need to educate the people to the fact there is a bill to clarify the meaning of the SAFE Act, which I think is very important and that is to bring the freedom to communicate, to sell. To muzzle sales people or a community manager under the guise of the SAFE Act was never the idea behind that law. HR 5369 can help address that issue.

MHMSM: Danny Ghorbani, who heads up the Manufactured Housing Association for Regulatory Reform (MHARR) said that Congress “loves the manufactured housing industry.” He also said that Congress has given us these great pieces of legislation such as the MH Improvement Act of 2000, FHA Title I reform and the Duty to Serve underserved markets. Does Congress need to hold hearings with regulators to help implement these good laws as intended?

WJ: Sometimes members of a committee and particularly members of an oversight committee have the authority to hold hearings to see if a law can be implemented as it was intended by Congress. Sometimes it can be helpful. I think again, in this case, that educating the people in the federal government or in a State to understand that these rules and regulations come from legislation. Too many times they need to be reviewed for the reasons you noted. It always helps to review and make sure a law is implemented as intended. A lot of times, it’s a matter of a member of Congress writing to a regulatory agency asking how they implemented the law. It doesn’t have to be a committee holding hearings to get attention. I’ve been part of a number of members of Congress writing letters to regulatory agencies asking how they are interpreting the law. You don’t get a quick answer, but you get an answer. They go to their legal staff to help them respond so it will be accurate.

MHMSM: Are there any additional parting thoughts you would like to share?

WJ: Be involved. The world we live in today is so different. Whether its manufactured homes or not, I would say to any industry or members of the community, be involved. Residents of manufactured homes are very active in the community and they should let their interests be known. Really, I think that’s the reason the manufactured homes industry has evolved into the respect it has earned. Because you are providing a quality home for people. That’s what makes the difference in the Federal legislature and the State legislatures. When you have arrived at this current level of quality and appeal, and you have earned the respect by providing a quality product, then that changes the whole debate.

EM: Thank you for taking the time to talk to us.

TK: Congressman, I just wanted to personally thank you. You’ve made some excellent talking points. Once we finish putting the interview together, we’ll make sure your office has a copy and I hope that you’d be open to doing this with us again sometime in the future.

WJ: I’ve enjoyed it, thank you very much; and I have a great appreciation for your industry, I really do.

TK: I can sense that and I had a fantastic time chatting with you at the reception.

WJ: Thanks for that, too.

TK: You’re one-of-a-kind and just God bless you, sir.

WJ: God bless you, too, both of you, and may God continue to bless America; we sure need His love.

TK: Amen to that, sir.

WJ: God bless.

EM: Bye-bye.