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An MH Industry Turn Around Plan, Part II

November 16th, 2011 No comments

An MH Industry Turn Around Plan, Part II

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

Dick Moore’s Industry and Finance Perspective

November 16th, 2011 2 comments

 

Dick Moore's Industry and Finance Perspective
 
Well, it seems that I struck a nerve with our friend up East. He mostly disappeared for a couple of years, quit writing his newsletter, and went dormant. I figured maybe his conscience was bothering him, after the spin he put on our industry.
 
Now I see a new post from our buddy in “Industry Voices,” the guest platform on Tony Kovach’s e-zine MHMSM NewsLine (MHMSM.com = MHProNews.com), wherein he goes on and on about me in a general mis-representation of my writings. I certainly never opinioned that he had powers akin to Superman. He did, however, invent some mystical losses derived by using losses from Brigadier, Conseco, and other lenders who did not know or understand how to buy MH paper. He then reported those loss figures to Fannie Mae & Freddie Mac, keeping them out of the (Manufactured Housing) markets.
 
This lack of competition had a negative impact on the other lenders that were still major players in our industry.
 
He admitted to me in Louisville one year that he was an “attorney” and was being “paid” by Fannie to advise them. He later denied all that, but everyone knows the credibility of lawyers and politicians. After all, who else gets “paid to have an opinion”?
 
My ex-neighbor was a college professor who taught business
administration at Memphis State University. After listening to his
many goofy ideas and theories, I realized the source of the old adage “If you can’t do it, teach it.” If you were a failure in the finance business, then go out and advise others how to do it!
 
The Mortgage Industry produced paper much worse than the MH
industry ever dreamed of, and that was the paper that our friend
advised Fannie to buy (instead of MH paper). Fannie’s losses are the worst losses the United States has ever endured, and it continues still. (How good was that advice?)
 
It is easy to measure or analyze a situation the way you
want it to look – just choose the measuring criteria needed
to give you the end result you want and ignore any thing
that doesn’t.
 
The MH Industry (its survivors) remains the only low-cost housing that is un-subsidized. Just because less qualified people enter the business and lose money from their poor business decisions does not equate to a ‘subsidy.’ Maybe our friend does not know or understand what a subsidy is. He sounds like Obama explaining the debt ceiling and how someone else created it.
 
I’m sure there will be another argumentative letter, but I have work to do and do not have the time to continue with fruitless exercises in writing.
 
********
 
This industry and its recourse lenders fared well and made good money from the 50’s to the 90’s, with no taxpayer subsidies.
 
This industry faces a number of problems, with the main one being lack of financing. The lenders and the learned professors of the industry like to blame the dealer for all the woes. True, we have had some bad apples in our business, just like every other industry. But the level of damage from that kind of dealer falls way short of the debacle we as an industry are paying for now.
 
One major issue our industry faces concerns resale values of our houses, which directly affects the lender’s recovery on defaulted loans. We as dealers have very little influence in that arena.
 
Many MH Communities will not accept houses over 10 years old; lenders will not finance homes over 10 years old. Somehow, when the house hits its 10th birthday, it suddenly is worth ZERO!?!?! And this is the dealer’s fault?!?!
 
When free enterprise existed in this country and banks lent money to their dealers with recourse, our industry performed well! Lenders were selective about who they would take on (based on the dealer’s financial condition and track record in the community), the dealers would take care of their funding pipeline by not sending them dead-beats (since the
dealer would have to repurchase if the loan fell out), and the dealers were paid endorsement fees for this guaranty. The dealers worked to re-sell the bank’s repos with good unpaid balances, and the paper overall performed quite well. It was that performance that led to the influx of the non-recourse lenders that we saw in the 90’s.
 
Long-gone lenders such as Bombardier, Conseco, Greenpoint Credit, BAHS, et al, saw the performance of recourse lenders’ portfolios, due to good resale values on houses sold under recourse agreements, and made the mental jump to they can do that too! Soon tactics such as withholding of proceeds and diverting rate spread and the odd-days’ interest into non-interest bearing reserve accounts became the norm from the lenders, at the expense of their MH dealer network.
 
In their headlong rush for gold, they also opened the funding gates to credit buyers who (like in today’s meltdown) had NO reason in their track records to get approved for loans at low rates and low down payments.
 
So, they kept the endorsement fees, put that rate spread into a reserve account for repossessions, and bought non-recourse.
 
Their inability to manage the repos, refurb and re-sell them (as the recourse lender/dealer relationships had done) created massive losses for them. Again, I fail to understand how this is the dealer’s fault.
 
********
 
President Obama is railing against corporate jets, while flying around on the most expensive jet in the world. The tax deductions on all the corporate jets in the US would not pay for Air Force One. Is this leading by example or “Do as I say, not as I do?”
 
Good leaders lead by example. They don’t accept favors from lobbyists and major contributors to their re-election campaigns, and they don’t spend the taxpayers’ money recklessly.
 
The crash of the housing/mortgage industry was caused by Fannie Mae and Freddie Mac, which is govt. money invested into private enterprise, wherein all the profits go to the cronies of powerful govt. people, but the risks and losses go to the taxpayers. # #
 
post submitted by
R. C. “Dick” Moore