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Dodd-Frank Congressional Hearing – Lost Opportunity?

June 20th, 2011 No comments

Dear Doug, George and Tony:

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

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

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

Thanks,

Danny

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


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

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

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

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

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

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

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

May 20th, 2011 2 comments

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

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

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

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

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

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

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

The industry needs to go forward, not backwards.

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

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

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

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