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RV/MH Hall of Fame Celebrates Inductees

August 13th, 2012 No comments

Surrounded by more than 300 family, friends, and colleagues from across the country, the Class of 2012 was inducted into the RV/MH Hall of Fame (Hall) at a gala ceremony last week in Elkhart, Indiana.

Barry Cole (Manufactured Housing Insurance Services), chairman of the board of directors for the Hall, said, "What a joyous occasion with all past legends and present leaders of our great industries to honor the ten new inductees. There is no industry function that can equal the emotional feeling and happiness when mingling and networking with so many greatest of the great."

Cole believed it was an incredible evening supported by both RV and Manufactured Housing segments.  

Inductees and family members accepting on behalf of deceased inductees include: First Row (L-R): Doug Gorman, 

Stan Sunshine, Gerald "Jiggs" Meuret, Kaki Williamson, Jeanne Mize, Rachel Gandy, Mary Irene Younkin, 

Michael Evans. Second Row: Bob Olson, Kent Titcomb, Allan Yoder, Gail Yoder and Holly Yoder.

"The cocktail party was fun, the huge group picture with all attending was charming, the dinner as always was incredible and best of all was the touring of the RV/MH Hall of Fame itself." Cole continued. "Wandering through the exhibits, theater, library and museum surprised some new guests. They were shocked at the unbelievable greatness and beauty of the building plus discovering their heritage for the first time. All comments from everyone referencing the Hall were in superlatives."

"Some of the many MH veterans who mingled and networked during the cocktail hour were Ron Younkin, Jeff Wicke, Dan Rolfes, Tim Williams, L. A. 'Tony' Kovach, Ken Rishel and George Allen." 

"At dinner Dick Jennison (MHI) was sitting with a contingency of MH professionals Jim Scoular, John Evans, Leo Poggione, Darrell Boyd, Chris Barrett and John Loucks. Ross Kinzler was sitting with Jigs Meuret and Danny Gorbani (MHARR) sitting with Doug and Millie Gorman. These are a few of the enormous number of MH attendees."

"These are a few of the enormous number of MH attendees."

 

Keynote speaker David Humphreys (left). Darryl Searer (right) delivers good news concerning the financial health of the Hall

Keynote Speaker David Humphreys, former president of the Recreation Vehicle Industry Association said, "The Hall of Fame serves many purposes for the industry. 

Besides providing a great consumer attraction, the Hall of Fame defines an important message for the financial community, the media and legislators and gives a sense of pride, unity and accomplishment for the entire industry."

Noting the solid financial footing the Hall of Fame has achieved through the leadership of President Darryl Searer, Humphreys urged audience members to give the same priority to the Hall of Fame they give to industry unity."

In a behind-the-scenes look at the financial status of the Hall and its recovery from near insolvency just a few months ago, Searer declared, "The Hall of Fame has never been in better shape than it is today."

Overall debt owed by the Hall has been cut by $2.5 million in the four months since Searer assumed the Hall presidency.

Cole added, "It was a special evening you just did not want to end. You are invited next year."##

barry-cole-rv-mh-hall-of-fame-manufactured-home-insurance-services-mhisBarry Cole, Chairman, RV/MH Hall of Fame

The Emperor has no Clothes

August 21st, 2011 13 comments

There is a lot to say about what has gone wrong with our country and our Industry.  We will begin ‘at the top,’ with our Chief Executive, President Barack Obama.

What’s up with Obama’s recent bus tour?

I’m no fan of the prior president, but say what you will about President W, when he took a similar bus trip to President Obama’s, W used campaign dollars to pay for it.  Where is the “watchdog” media? Why no hue and cry when the administration buys millions of dollars of Canadian buses so President BO can tour in style on the taxpayer’s dime?

What’s up with all that?

Isn’t it ironic that BO tours campaign style after lecturing millionaires and billionaires about private jets and corporate perks?  Or is that rhetoric just a way of getting the votes of middle America and ‘the little people?’

Do you like ‘divide and conquer politics?  To me, it is plain wrong.  Talk about issues, talk records or about facts.  But don’t pit one group against another.

I need to be clear that W vacationed considerably more than BO.  But W went to his ranch or Camp David, etc.  But to add irony to injury, on the heels of all this bad economic news, BO is in Martha’s Vineyard – the haven of the elite – now?

Even left wing commentators see this vacation in the New England playground of the rich and famous as a problem.

  • Experts and government statistics suggest we have 17% unemployed and under-employed.
  • We have more people on food-stamps and welfare than at any time in U.S. history.
  • And BO will give us his ‘next’ jobs program in September, after his resort vacation?
  • Where are all those shovel ready and other jobs from the ‘first’ one?  Or were all the jobs ‘created’ at the job killing CFPB?

They say the emperor has no clothes.  Well, we have no emperor, but a president and his wardrobe looks just fine.

Ascendancy and Dependency

It is the party of dependency that is still in ascendency.

Or at least still in high office…

…dependency is a major voting block today.

Be it government labor unions, federal jobs or those on government assistance, it is an issue.  We have to put people to work, not get them used to no work. We do need federal and other government jobs.  But we can’t give everyone a job regulating someone who is working to produce a product or a service that keeps America’s wheels turning.

If we do not change our ways federally and locally, we will look like rioting old England some day, because we can’t afford to keep adding to our debt and taking on more programs that fail to foster independence.

While we have plenty of dependency programs, meanwhile, we have

  • flash mobs that form, rob, harass and harm others in our cities.
  • We have automatic weapons fire along our southern border.
  • We have three wars we are involved in instead of the previous two.

I didn’t favor W taking us into Iraq, nor do I favor BO taking us into Libya.  Even if we ‘win,’ what have we won in either case?  We spill American blood and treasure, for what?  We can’t be the world’s cop, and we can’t have wars for the sake of foreign oil, etc.

Let’s drill and do energy on U.S. soil and off U.S. shores, as safely and prudently as possible.  Think about the major jobs creation potential.

Private enterprise can pay for it all without federal dollars.  Let business people do business in America again.

Another Recession, whats up with that?

The media speaks of double dip recession.  What’s up with that phrase?

Did anyone notice that the ‘great recession’ never ended?  Did you notice that the housing markets still suffer, and Keynesian/Euro socialist economics just added trillions to our debt without giving us a stronger economy?

No jobs.  No stimulated business.  Tougher lending.  Very little respect overseas.  Where is the change we can believe in?  Or was that supposed to mean the pocket change we have left after taxes?

Third part candidate George Wallace once said there wasn’t a dime’s worth of difference between the two major parties. Thus Wallace favored what some have for years, a third party to bring America back. But Ronald Reagan had it closer, we don’t need a third party, but a rejuvenated second party.

That means we don’t need Rino Republicans, Republicans In Name Only.  To me, W was a Rino, socially conservative, but nearly as much a man about big government as BO is.  W helped give us that darn bail out of the bankers.  W took us into two wars with no end in sight.  W’s dad may not have “finished the job” in the first Gulf War, but he had the smarts to get in and get out.

We need business friendly independents, Democrats and Republicans.

Businesses create jobs.  Jobs are what American’s need, and then they can start buying houses again!

Speaking of jobs, how about creating 20 million new ones?

I’ve read the same reports you have; that there are two trillion dollars of investment money on the sidelines – actually overseas – that could be brought back to the U.S. In short order.

But that 2 trillion fled America due to regulations and tax policies.  Do we have the political will to bring those trillions back?

Think about what Two Trillion Dollars we don’t have to borrow, or write down, would mean to our country right now.  If every $100,000 invested created only 1 American job, that would mean 20,000,000 jobs.

Think: 20 million people off aid, off food stamps, off unemployment or other government programs.  2o million more taxpayers.  Think 20 million people less dependent, means we would be that much closer to a balanced budget!

We better find and support candidates in whatever party who know how the free enterprise system works, because creating jobs by supporting business is what we should be about.

Free Enterprise, not Keynesian/Euro socialist economics, is what made America the land of the free and the home of the brave.

November 2012 is shaping up now.  Who we support now for our state houses, or for Congress, the Senate and the White House will be on the ballot 15 months from now.

Personally, I’ve contacted my senators and representative and made my feelings known on economic and social issues.  But I will also make them known on the path to election 2012.

Give the man his props

One thing that our recently bus touring and now vacationing BO has done is give us an executive order we can believe in.  With all due respect to Marty Lavin, Danny Ghorbani was the first to bring it to our Industry’s attention.  We speak of Executive Order (EO) #13563, similar to President Clinton’s issued in 1993.

MHMSM.com posted EO #13563 months ago, that requires an examination of regulatory impact and its benefits.

MHARR is right.  HUD’s budget has grown, while our industry shipments have shrunk.  What’s up with that fact?

What the president – at least on paper –  has done is give us EO#13563 which could hold HUD and other regulators accountable.  Now will our national associations use that to our Industry’s benefit?

The Fall Congressional hearing on Manufactured Housing

Ooops.

Who do we have in DC “helping us” in the planned fall Congressional hearings on our Industry?  Congressman Barney Frank.  What’s up with that?

Let’s see.  Barney helped give us the SAFE Act.  Barney also gave us part of the name of the bill that in his: Dodd-Frank.

So do you feel safer or dodd-franked?

With friends like Barney, does our industry need any federal enemies?

Who is watching how our industry PAC money is spent?  Is this the type of anti-business candidate we need to support?

Where is that change we can believe in?  Or did I drop that change the last time I filed my quarterlies?

One of the best meeting planners around, but…

I asked Tony Kovach why George Allen’s Roundtable was not on the MHMSM.com calendar.  “George isn’t an association, and he opted not to pay for an ad.”

Maybe there is considerable momentum from last year’s event that MHMSM.com did promote.  I noticed that Allen is reporting more state association executives coming to the Roundtable this year.  State execs are often ‘comped’ for coming to an event.  George is one of the best self-promoters the Industry has seen in the past 2 decades.  I’d want state execs helping me promote an event of mine too.  Nothing wrong with it, a common practice.

In the manufactured home communities world, Allen’s Roundtables are unmatched.  Allen gets some fine speakers and topics in.  They are informative and enjoyable.

However, I can’t always agree with George Allen’s commentary, live or in his columns here or in his own publications.  Let’s parse some of his recent ones for a few moments.

I understand and agree with George that MHI doesn’t seem to have a plan for our Industry’s recovery.  What’s up with that fact?  I can see why the natives are restless in the NCC, even with Lisa B getting appointed.

George is spot on that MHI is failing to do half of what an association is called to do – protect and promote.

  • Where is the Industry promotion?
  • How has MHI worked to reverse the Industry’s downward new home shipment trend?  Marty was spot on regarding that topic, in his recent column.

But George’s bashing of Danny and MHARR misses the mark.  Why?

Because MHARR is an association for independent Manufacturers. MHARR don’t get paid to represent communities or lenders or suppliers.  MHARR doesn’t represent retailers,  which if you ask retailers like Doug Gorman or Dick Moore, MHI doesn’t seem to do such a hot job for them either.

George, the point is that MHARR can’t be faulted for focusing on what its members pay MHARR to do, namely, work on regulatory issues.  So George, if you want to fault Danny, fault him for something that group is paid to do.  At least MHARR has stated publicly they support the ‘post production’ sector (MHARR code words for MHI) in their efforts to modify Dodd-Frank, SAFE, etc.  I’ve not seen any similar effort from MHI back towards MHARR.  If it exists, it is behind the scenes.

I also agree with Marty Lavin that we better watch more what people say than what people do.  We better watch results, because words alone can be cheap.

Or words can costly, depending on how you look at it.

Industry Marketing and Image Campaign

Speaking of MHI and the Industry image campaign…

…I’ve seen the plan Tony, IMHA’s Mark Bowersox and others have put together.  In a word, brilliant.

In my mind, they need to consider a different name, but for now they are calling it the Manufactured Housing Alliance and Phoenix Plan.  Their plan navigates the key political issues that our industry has faced that has kept us from moving ahead.

We keep reading from MHI the statistics about our dropping new home shipments.   This gets back to the dual role that an association is supposed to have, protect and promote.

Where is MHI on this MH Alliance/Phoenix Plan effort to turn around our image, marketing and sales results?

Silent.

By contrast. I see John Bostick’s name on the page in favor of the MH Alliance/Phoenix Plan.  That makes me want to order some Sunshine Homes and get others to do the same!

Good for MHARR’s Chairman, who did not endorse it on MHARR’s behalf, but Mr. Bostick has obviously taken the time and had the guts to publicly say, hey, this can work.

Which leads to the questions:

> Where are the MHARR members or Danny on this plan?

> Where is MHI on this plan?

Marty Lavin on Danny Ghorbani

I’m the first to agree with Marty that Danny needs to polish up those lobbying skills.  In fact, let me take Marty’s points a step farther.  As I personally see it, and others may disagree, Danny has three options:

  1. change your ways, permanently and rapidly, to become more effective at what you do for MHARR,
  2. retire and consult for MHARR as needed;
  3. or just retire.

Danny, retire? What would happen to MHARR without Danny?  What’s up with that idea?  Can you even say MHARR without saying Danny G’s name?

Yes, you can.

Attorney and MHARR VP Mark Weiss is a good man.  Mark knows the law, can be reasoned with and Danny has prepared him to take the helm at MHARR, when the time comes that Danny decides to retire or when MHARR members make that decision.

For example, MHARR could bring in a new associate, give Danny a nice gold watch, and a one year transitional consulting agreement.  The independent factories that support MHARR can save money.  As or more important, they likely can get more done and advance their cause in DC with HUD, Congress and other regulators.

The timing is right for a change at MHARR.  Danny, don’t take it the wrong way, you are a smart guy and know the HUD Code as well as anyone in the manufacturing side of the Industry.  But in my personal opinion, it is time to change your ways for the better or you better retire.

The best suits and fine meetings

Danny has some of the best suits in DC that our Industry can brag about.  Danny and MHARR are spot on with some key issues.  But you can be right, and still do things in a way that turns people off.

But give the man his props, Danny is right about MHI meeting,

after meeting,

after meeting and

…where is the MHI plan?

But then, Danny – if you stay – you and MHARR should then walk the walk and have an action plan of your own. Not a some day, or five year plan, a let’s get it done now plan.

Perhaps John Bostick’s public move supporting the MH Alliance/Phoenix Plan will inspire others of stature to make their own public statements or just help launch the program.

But at some point, we need to get past meetings, and get to doing.  46,000 shipments.  We are now down about 88% from our post HUD-Code high in 1998.  How much lower can we go and still have an Industry?

  • We can’t fill empty home sites with only used product.
  • We need new homes bought from factories and sold to consumers.
  • We need retailers and community operators who attract customers with good credit, and then close them and turn them into happy homeowners who will tell their friends and once again let our Industry grow.

The Numbers on MAP

I like abbreviations. Let’s call this plan of Mark’s and Tony’s MAP for short, because this MH Alliance Phoenix can be our road MAP to the future. Maybe we can get Tony and Mark to come up with a better name.  But in the mean time, MAP it is for me.

I asked Tony to give me a projection on what he thinks MAP can do.  His answer?  First year from the launch date could double shipments without a need for hurricane season (no need for FEMA orders).

The next year could double it again.  That would be roughly 92,000 shipments in year 1. Then 184,000 shipments in year two.

Take a look at the MAP if you haven’t already.  If you have a better plan, why not share it?  But if not, get behind the plan that is out there being discussed.

I’m told that MAP can be up and running in short order.  We can do MAP, with no waiting for federal or state action!

Doing the Math, my Math not Ts

Tony has his math, I have mine.

Let’s say MAP was launched, and then MAP raised shipments back to 75,000 the first year.  Let’s further say, 1/2 of the increase went into communities.

  • That would mean 14,500 spaces filled.  At say $275 average a month per site, that would mean $47,850,000 more to MHCs a year.  Plus the profits off the home sales.
  • 29,000 additional new shipments would mean 29,000 new jobs.
  • It would mean security for those whose jobs or businesses are at risk due to declining shipments.How many MH plants would stay open?
  • At even a low $50,000 average per home, that 1.45 billion in new sales.  Think about the boost in revenue to retailers and developers.

Would you give $75 per location to boost sales $1.45 Billion and create about $48 million in new communities revenues?

If not, please go back to 5th grade math.  To me, this spells a good deal.

Let me stress, these are my numbers, not T’s or Mark’s.  But it tells me why they and others are working to see this plan happen.

Chattel Lenders

I’m not without experience in dealing with personal property lending.  While he wasn’t talking about just lending, I agree with Chad Carr’s recently published statement about MAP.  The MH Alliance/Phoenix Plan is the only plan I’ve seen that gets to the heart of fixing chattel lending for our Industry.  MAP provides solutions for image, lobbying and other practical issues too. It dares to be bold, without trying to step on any industry group’s toes.

If your chattel lender has not yet seen this, she or he better do so!  This can help us cut our repos losses dramatically.

It will help our customers – manufactured home owners – dramatically too.  That will in turn attract more customers, and more credit worthy ones.

Manufactured housing lenders need to see our losses cut.  Because that panel of lenders at the MHI Congress last April were correct.  A repo can cost 50% (or more) of the loan balance.   There are so many dark clouds that hang over personal property lending for manufactured housing right now, we have to have solutions if our Industry will ever advance.

In fact, our survival depends on it.

I asked Tony specifically about people who have and have not seen MAP.  T won’t comment about those who haven’t shared a public statement. I can respect that, but it does leave us guessing.

So someone needs to ask Marty Lavin or Dick Ernst where they are on this.  Have they seen it?  What is there take?  It is obvious that Ken Rishel has come out for it, big time, in his own newsletter and on MHMSM.com too.

Come to think of it, where is George Allen’s name on this subject?  Didn’t he say a few months ago, we needed an image campaign?  What’s up with that?

We could go through a list of industry leaders and say, what about you?  Where are you on this MAP subject?

If you are for it, why not say so publicly? If you oppose it, why and then propose your own alternative!  Mark, Tony and those working on this want to see consensus. I appreciate that, but I’d add that we can’t afford to debate stuff forever.  We need to move ahead, and pronto.

If we do not start advancing, more factories, more retailers and more communities will fail.  It is simply 5th grade math.

State and Communities Association leaders

Given that a pair of state association leaders have already publicly stated support for the MH Alliance and Phoenix plan, it is reasonable to think others have seen it too.  We need to watch and encourage this plan at the state level.

Because let’s be honest, the states are where it is at.  All politics are local, and your business happens at the state and local level.

Last year, we saw some state execs who took a leadership role to get things happening at the federal level.  We need to see that again, and we need to see that on MAP or their best alternative to it.

A pimple on an elephant’s bottom

We’ve heard this expression at meetings and coffee tables.  I admit it sadly fits the influence our Industry has politically in DC today.  We need to be working tea parties to get the party of jobs, business and growth moving ahead. We need to hold the feet of those who say they will change DC for the better to the fire, and get the gold of jobs and rising housing back to work building the U.S.A.

We have lost our nation’s AAA credit rating.  Debt piles up, what do we have to show for it?  Where are the jobs?  The lending?  The recovery?  What did we bail out anyway?  Who benefited from all that taxpayer funded largess?

We saw some amazing upsets at the midterms, and I think we can see more if we plan now for the best candidates and then mobilize for the general elections.

It is frankly another good reason to learn and get behind the MAP.  We will increase our influence at the state house and in Washington when our consumers are visibly supporting us in sizable numbers.

Let’s work and earn the support of our communities’ residents and home owners/customers!  Then we should make sure we continue to deserve it.  Without happy customers, we are as doomed as if HUD bureaucrats or others would just shut us down.

TANSTAFL

If I boiled this down, it would be this.  We can’t have something for nothing.  TANSTAFL = There is no such thing as a free lunch. Someone always pays.

We better work for truly positive change, or we will be left with pocket change.

We better look at and support a plan that can move us ahead.  I vote for the MH Alliance/Phoenix Plan.  Or we will suffer the fate of the buggy whip makers.

I shop at WalMart no more than I have to, because I believe in supporting the smaller and more independent business women and men out there.  They are more like me.  They want to serve me, and I in turn want to support them.

We better support the HUD Code builders, and they in turn, better support us too.

Talking and Doing.

Before we look at any other emperor who also lacks clothes, let’s close for now. Talk is fine, but let’s follow talk with do.

I want to thank those of you who have written.  Please do not think me rude, but for now…

…I hope you understand that some things need to be said that have gone unsaid too long.

More next time.##

post submitted by
Michael Barnabas

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As I See it – advancing Manufactured Housing Chattel Lending – So Now What?

July 15th, 2011 No comments

As we come to the 4th of July or Independence day, I decided to carve out some time to add what I hope to be constructive ideas to the manufactured housing industry chattel lending issue.

Being involved in the industry for over 25 years I have rode the shipment roller-coaster (like many of you) more than once.  However, we cannot look to the past as our salvation for the future.  Nor can we look to Washington D.C. for our salvation.  Our “friends” in Washington D.C. can’t even balance a checkbook or a budget.  As my kids learned in college, there’s book smart (passing the tests) and then there is the real business world.  All the studying done in college has had very little to do with their business life experiences (or so they tell me).

So now what?  While presenting my idea for the industry, I’m simultaneously having a Rep. Paul Ryan-Marty Lavin moment.  Put your idea out there and let the attacks begin.  Even so, I still wish to share my thoughts as they may springboard (or whiteboard) the manufactured housing industry to the answer we all seek.

1st – Washington D.C. – This is the land of unintended consequences.  Where to start?  Safe Act, Dodd-Frank, CFPB or TARP pick any of the alphabet soups, did they do anything for us?  As an industry what did we do to them?  Sure we can relive what the Green’s did to the bondholders on Wall Street.  But they were bondholders who took on a risk for a return.  Whether it was a straight deal or not is why people charge for due diligence reporting.  Did we cause the mortgage backed security world to implode?  No, for that, I say look to D.C.  Fannie, Freddie, FHA, VA and Ginny Mae all were smarter than the rest of us. They wanted homeowners, so they put programs in place to get what they wanted.  Forget underwriting, down payments, proof of income, job verification and speculators, they wanted loans.  Did mortgage brokers take advantage of the system?  Yes!  Did they write the rules? No!  Those that are guilty of fraud should be punished to the full extent of the law.  Our industry was and still is collateral damage.  I guess that’s what happens when you are to close too the bomb blast.

2nd – Banking Institutions – Coming originally from a bank and credit union background I understand where depositories are coming from with regard to the decisions they make for our industry. Over the years we have presented opportunities to a myriad of institutional sources of capital and over 250 said, “No thanks”. The irony was, most of them actually liked the opportunity and the plan behind it. Some of the ones that said no, even said it was an outstanding opportunity and program. The ones that signed on, had some of the best results they had ever experienced with installment loans. But a funny thing happened along they way.  The keys to the vault were hijacked from the decision makers and placed into the hands of auditors and regulators.  Many lenders cannot make loans due to the ever-changing capitalization requirements.  If you really want to get your banker excited, ask them what has happened to the premiums for deposit insurance from FDIC & NCUA.  With the new lending regulation and bookkeeping (ratios) requirement ball always on the move, my lenders became deposit acquisition specialists. The TARP (Trouble Asset Relief Program) program did not live up to it’s name and became a vehicle for the big banks to get bigger.  If you are not familiar with the PNC – National City merger that alone should give anyone reason to pause.  I know that lenders want to make loans; it’s how they derive their income.  Not every bank can go to the Fed window and play the daily swap game between Fed funds and Treasuries (Citi).  So we are left with an under capitalized banking system (in the regulators view) that has put a lid on lending.  Based on current economic trends, the housing market inventory (both real & shadow), the troubled alphabet soups mortgage operations and D.C. politics, I unfortunately do not see lenders running to us with bags of money for a long time.

3rd – Ourselves – While we have been in a steady ten plus year shipment decline we cannot excuse ourselves.  Our market has remained basically the same since I started all those years ago, newly wed and nearly dead.  While parts of the industry have tried to morph into “traditional housing” e.g. bigger is better, we still had rampant documentation fraud, blown up invoices, backbreaking advances, excessive loan terms, lot rents increasing into un-affordability and our own “trick” lending programs (ersatz  ARM’s & 30 year paper).  We are now being treated like the child we presented ourselves as to the world.  While everyone points the finger at everyone else as the culprit we all forgot the golden rule.  The guy with the gold makes the rules and they decided to go home.

Over my years in this business, I have observed several areas where the industry system consistently fails. In order for homes to hold their value, there needs to be a healthy system for resale of homes owned by homeowners, just as there is in site built housing. Unfortunately, no such system exists in manufactured housing. MLS does not support our re-sale market in most states.  We’ve talked about our own MLS for my whole career and while there have been some great attempts (for example mhvillage) we are still a second class citizens compared to the real estate market.  By not having a re-sale market program we only hurt ourselves as our current residents cannot sell their home and, as a consequence, get mad, depressed and finally jingle mail the keys to the lender or community and leave.

Industry lending philosophies contribute to that problem by charging higher interest rates on pre-owned homes. Even after all my years in the business, it still stuns me to this day that we charge interest rates based on the age of the home. This does not happen in site built housing, thus giving site built an advantage, and manufactured housing a disadvantage, when it comes to the performance of the collateral from a lender perspective and investment performance of the home to everyone else. It also depresses any attempts to create a healthy system for reselling existing homes.

Another problem is the method in which repossessed inventory is handled. While the lenders should have a better plan than most do, many parts of the industry conspire to keep them trapped in a guaranteed to fail program. Almost every independent retailer, and many community operators treat outside finance companies like victims to be slaughtered rather than as important partners at the table. When a home is repossessed, many hands, motivated by self-centered greed are demanding money from the lender. Retailers want full profit fees to move homes onto their sales centers where they sit unsold until the lender gives up and allows the retailer to “steal” the home so that the retailer can then sell the home and “hit a home run” on the lender’s loss. The retailer is both short sighted and greedy in this transaction, and the lender lacks the fortitude they should have to shut the retailer off from future financing.

While the environment is somewhat better on the community side, it varies greatly from community to community. When Ken Rishel was a community owner, he correctly viewed outside lenders as important stakeholders. As a consequence, he saw the value of shared risks and never charged lenders lot rent, maintenance fees nor commissions for selling their repos if his people couldn’t get a sale price higher than the deficiency balance on the loan. When he began to focus on outside lending, he persuaded other community owners to the same view. When I started Precision Financial with Diane years ago, we asked community owners to agree to much of the same terms and many agreed.

Unfortunately, those community owners are not in the majority. Most expect lenders who own homes in the community to pay tenant’s back lot rent, the rent going forward until the home is sold, a commission for selling the home, and, learning from retailers, the lender’s home often goes unsold, with the hope of “stealing it” so, they to, can hit a home run on profits when the home is sold.

Until everyone involved possesses either the moral integrity, or sees the business wisdom to treat all the stakeholders fairly, the system is broken. It may limp along as it has been doing, but the problems that hold manufactured housing back will remain.

Appraisals have also become a problem in part because of the lower prices of repossessed homes. We have loans we cannot do because they will not appraise either through comps or through NADA, or even our own proprietary system of appraisal. We are now reaping the field we sowed.  All the wholesale homes have lowered everyone’s collateral value.  Not only have home values been depressed, but also what is happening to the community value if all the home values are 30% to 50% less and occupancy is going south?

Industry Image

To go RV’ing or not to go?  There have been many ideas floated within the industry as to what is needed to change the public, regulator and banker’s perception.  This issue is above my pay grade.  However, Einstein defined insanity as “doing the same thing over and over but expecting different results.”  All I know is that we have let others define us.  It is time we define ourselves.

So now what?

I think there are 4 plausible solutions for everyone to ponder.

1. Everyone can subscribe to partnering with Clayton Homes.  Who wants to fight Mr. Buffet?  I have been an admirer of his for years and even own Berkshire Hathaway stock.

2. Captive Finance – while D.C. is not making it easy, it is a stable and reliable plan for those who have the expertise, or are willing to hire the expertise they need. That it creates new challenges is undisputed because, done correctly, it requires a whole new set of business skills that few community owners or retailer possess. Done incorrectly, it is a disaster waiting to happen. It is not a short-term solution, but rather a long-term one that almost demands affiliations with outside experts to succeed.

3. Current lenders – Be sure to take care of the ones left.  They have been with us through the darkest of times.  Take care of them today and they will be here tomorrow to take care of us.

4. Lastly, a new idea. While not a new idea, as it served its purpose in the past for another industry and may well serve a purpose for us.  I’m talking about a manufacturer based captive lending program.  While it carries risk, it also carries a stick.  If you’ve never been involved in an auto dealership that had a sizeable portfolio with GMAC, Ford or Chrysler you do not understand the size of the stick the manufacturer captive lender holds.  If you loaded them up with poor-bad paper and cause high losses, it could cost you your dealership franchise.  No one wants to risk that decision.  In the beginning, before the automobile captives became market share driven, they would only finance their own products and were the most profitable arm of the entire company.  Our company has been researching this concept for a number of years, and we are in a position to help make this happen if a group of manufacturers would actually sit down in the same room and band together to make it happen. To this point, there have been no takers. Their dislike and mistrust of each other seems to color their survival instinct.

In the end, from my point of view, lending is about the 4 C’s:

Capacity – Can they afford the purchase without strain? Will that income continue?
Character – Would their word and their handshake be enough to make the loan?
Collateral – Are the ATF & LTV viable for the terms and conditions of the loan
Credit – Have they proven they have the self-control to manage their money and do they feel responsible for paying their bills on time?

The federal government controls none of these traits.

If you have made it this far, thank you.  Will any of these ideas help?  I hope so.  If anything, at least a conversation may start. Years ago when people asked me what I thought, I told a few and they thought I’d lost my mind. When I investigated the current D.C. promulgations, people again thought I’d lost my mind.  After awhile you begin not to speak up.  I was hoping the whole time that I was wrong.  Oh, I wanted to be so, so, wrong.  To Marty Lavin, I want to wish you well and treasure all the things I learned from you. They painted you, Gubb Mix, Ken Rishel and I with the same brush; only they have been far harder on you than the rest of us.

I asked my dad one time to try and fix my golf swing.  His advice after watching me was that there are 1,000 things going on in my swing and where would I like to start.  Our industry has many things it can improve on.  We need to start.  We still have and always will have the best affordable housing option story to tell people. # #

By Pat Curran, President
Precision Capital Funding

Dodd-Frank Act and Manufactured Housing

July 12th, 2011 No comments

Editor’s Note:  Received from the Manufactured Housing Institute (MHI), July 2011, thanks to a communication from Executive Director Thayer Long

The Wall Street Reform and Consumer Protection Act of 2010 (or “Dodd-Frank”) is approximately 2,200 pages long and affects all financial service products, including manufactured home loans.  Because of the legislation’s enormous size, complexity and its broad scope of impact, discussing it in piecemeal terms is difficult.  Even within the banking industry, community banks have a different focus compared with the large national banks.  For non-depository institutions, the same problem also exists.

Yet, there is a commonality of interest across a number of sectors.  Dodd-Frank contains a number of unintended consequences that impact a variety of industries and consumers.  For instance, with respect to the manufactured housing industry, Dodd-Frank was structured and written around a regulatory framework for real estate mortgages.  However, the bill essentially reclassifies all manufactured home loans as mortgage products.  Manufactured home loans not secured by real estate are not the same as mortgages.  To regulate all home loans the same way is an unsuitable model, which creates significant challenges to the industry and the consumers it serves.

Manufactured home loans have unique characteristics.  Manufactured home loans, in most cases, are much smaller than typical residential real estate secured mortgages and have shorter durations, which make transactional costs harder to recover.  Manufactured home loans have higher servicing costs than residential mortgages, requiring specialized knowledge and more personal contact and less reliance on technology.  Many manufactured home loans (with the exception of FHA Title I loans) are made with no government guarantees or potential losses to taxpayers.

How is the Industry Impacted?

First, the law creates a new standard for a “high-cost mortgage” loan which is based on interest rate spreads that fluctuate over time.  If the Annual Percentage Rate (APR) exceeds the average prime offer (the loan purchase rate established by Freddie Mac) by more than 6.5 percent, or in personal property transactions under $50,000 by 8.5 percent, then the loan is considered “high cost.”

For example, if the law became effective today a “high-cost mortgage” loan is any residential loan over $50,000 with an APR of 11 percent or more, or, a loan under $50,000 (if the dwelling is considered personal property) with an APR of 13 percent or more.  The law does not prevent “high-cost mortgage” loans from being made, but it does make it more difficult to make these loans, and it imposes a significant level of potential legal liabilities making them virtually impossible to securitize.

This is a problem because since our cost of capital is higher, manufactured home loan interest rates are typically higher.  Since Fannie Mae and Freddie Mac do not purchase loans or create a secondary market where manufactured housing lenders can access capital at a discounted rate, lenders need to rely on other sources to make loans.  These sources charge a higher interest.

Also, there are other fixed costs associated with making any kind of loan, such as fees for preparing the legal documents necessary to originate a loan.  These basic costs increase with each state and federal law and regulation that is enacted.  In addition, there are costs associated with each prospective borrower, including borrowers that are rejected and those who for whatever reason end up not taking the loan.  These costs also include a portion of the advertising and marketing that go into borrower acquisition, the costs of maintaining methods of communication, and the costs of determining loan eligibility.

This conflict is particularly compounded with existing manufactured homes sales, where loan balances tend to be smaller.  The loan may be smaller, but fixed costs are the same regardless of the loan size.  These fixed costs must be recouped in some way in order to make the loan.  Therefore, the only way to recoup these costs is by charging a higher rate.

If a lender decides to make a “high-cost mortgage” loan under Dodd-Frank, they must be prepared for a variety of new regulations, including

  • requirements for borrowers to undergo loan counseling by a HUD-Certified Counselor, the cost of which is expected to be $400-$600;
  • prohibitions that prevent financing points, fees and closing costs;
  • rules limiting late fees; and
  • rules requiring multiple disclosures to sell or assign “high cost” loans.

Second, Dodd-Frank does provide a path for relief through the definition of a “Qualified Mortgage (QM),” which is intended to provide a legal safe harbor from some of the Act’s more burdensome provisions.   However, the criteria that must be met to be considered a qualified mortgage include:

  • no balloon loans;
  • points and fees are restricted to 3 percent of the loan amount;
  • ability to repay must also consider taxes, insurance, and assessments; and
  • standardization of debt to income guidelines that have not yet been determined.

Again, because of the nuances in manufactured home lending, the definition of QM is unworkable for many loans made in our industry.  First, while balloon payments are not commonly made by manufactured home industry lenders, they are common with captive finance companies and local banks.  Second, the cap of points and fees at 3 percent coupled with our smaller loan balances will force lenders to charge a higher interest rate (thus tipping the scales and classifying them as “high-cost mortgages.”)

Communicating this in detail is complicated because the law’s impact will vary from lender to lender depending on their business model and the types of loans that they make.

What is true of all of the existing non-captive lenders involved in manufactured home lending is there is a limit, which varies from organization to organization, of how small a loan they believe they can make and still recover a reasonable amount of their costs.  Lenders will have to make a decision on what their lowest loan amount will be due to new limits on their ability to recover those costs.  To better understand this, a lender has only three ways to recover costs which are:

  • to buy the loan at a discount, which is only possible if there is a motivated seller involved in the transaction who is able and willing to accept a discounted payout;
  • to charge the borrower additional closing costs; and
  • to raise the interest rate and recover the costs as the borrower pays back the loan.

Even the strategy of using points to keep the interest rate below the triggers of a “high-cost mortgage” is impeded leaving no way to recover costs.

To further clarify, if the cost of origination and legal compliance equals X, that number does not change based on the loan size or duration.  The shorter the term and the lower the dollar amount, the harder it is to recover those fixed costs.  Here is an example:

A lender is considering making a $10,000 loan with a term of four years.  Using a risk-based pricing model, the correct interest rate is determined to be 11 percent.  If the fixed costs of origination are figured to be $2,000, the lender must charge the borrower either in points or closing costs that $2,000 to keep the rate at 11 percent.  If a law or regulation caps the lender’s closing costs or points, then the lender must look to raising the interest rate to recapture whatever costs could not be recaptured through points or closing costs.  If the entire cost were recovered via interest, the interest rate would need to be increased to 17 percent to recover the costs.

Captive finance companies currently have zero, or very low, minimum loan cutoffs.

Typically, they utilize higher interest rates to recoup costs, but often the justification for lending in the first place is that their related entities are profiting from the transaction in other ways, not the home loan itself.

What is the Result if Dodd-Frank is Not Amended?

Financing will still be available for those buyers with good credit and who can make a sizable down payment.  Industry lenders that have or require higher credit quality customers may not be as impacted by the “high-cost mortgage” loan provisions.   Those needing to serve customers with more challenged credit quality, and therefore needing to risk price their loans accordingly, will be impacted.

Also, those who fund low balance loans will find it more difficult to do business and existing homeowners will find it very difficult to sell their homes to buyers that need financing.

The dollar amounts for not making a loan will vary by lender because of all the variables detailed above, but each lender will find and set a minimum loan requirement based on their internal numbers.

It has been estimated that 50 percent of all the loans made on manufactured homes in manufactured home communities are under $25,000.  Another source has estimated that nearly 75 percent of all manufactured home personal property loans are under $75,000.00.  If the fixed transactional costs mandated by current and proposed law are higher than the lender’s ability to recover costs, the loan will not be made by lenders independent of other profit center relationships.

Bottom line is that without changes, there will be a significant number of consumers who will not be served.

Potential Solutions

MHI has an effort underway to seek bi-partisan legislative relief in six specific areas that needs and deserves the support of everyone in the manufactured housing industry.  The issues identified by the MHI Dodd-Frank Task Force are as follows:

  1. Elimination of the expanded scope of Homeowners Equity Protection Act (HOEPA);
  2. Clarification of the Qualified Mortgage Standards;
  3. Clarification and Consistent Standards of a Mortgage Originator;
  4. Exemption of Manufactured Homes from the new Appraisal Standards;
  5. Exclusion of Manufactured Home Loans from the Residential Mortgage Loan Definition; and
  6. Clarification and strengthening of exemptions for manufactured home retailers from CFPB Oversight.

A six-page white paper created by MHI can be obtained from MHI or any state association.  Industry members should obtain copies and distribute them to their Representatives and Senators along with personal letters and emails urging them to support this effort.  Those reading this article should distribute it as widely as possible throughout the industry along with their personal efforts to persuade other industry members, including employees and community residents, as well as suppliers,  to also contact their Representatives and Senators.

##

MHI is the preeminent national trade association for the manufactured and modular housing industries, representing all segments of the industries before Congress and the Federal government.   This article was prepared with input from the MHI Dodd-Frank Taskforce, in particular Ken Rishel, Sheila Dey, Dick Ernst and TF chair Tim Williams.

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

July 6th, 2011 No comments

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

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

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

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

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

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

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

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

No.

Is Seller Financing Exempt from the SAFE Act?

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

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

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

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

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

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

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

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

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

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

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

The IBISWorld Controversy and the Manufactured Housing Industry

April 13th, 2011 3 comments

Exclusive MHMSM.com Industry In Focus Report

The March 2011 IBISWorld report that cited manufactured home dealers as a ‘dying industry’ has made news inside and outside of the manufactured housing industry. MHMSM.com has contacted a variety of Industry leaders and personalities from coast to coast to get their comments. On-the-record comments have included national association leaders, as well as professionals in factory-built housing from the manufacturing, retail, communities and lending sectors.

Messages, comments and calls to MHMSM.com from manufactured home industry professionals dribbled in at first, and then gained in volume as publications such as The Atlantic and Business Insider covered the IBISWorld report. As an example of mainstream media coverage, a TV station in Houston reportedly called a regional firm to interview them about the developing IBISWorld story.

Derek Thompson, associate editor at The Atlantic, penned a commentary that included these words:

“At the center of a perfect storm of boomer burnout, a brutal recession,
and a rapidly changing industry, the mobile home retail market
could be the worst industry in America. Here’s why.”

Photo from The Atlantic
Photo from The Atlantic

“If I asked you to name America’s least fortunate industry, your mind might go to record stores, obliterated by on-demand apps; or photofinishers, left in the cold as digital cameras turn Americans into our own photo editors; or fabric makers, where business is booming … in Shenzhen, China.

“But when it comes to unlucky industries, it’s manufactured home (aka mobile home) retailers who really hit the trifecta. First they missed out on the housing boom. Then they felt the gut-punch of the recession. Now they might yet miss out on the recovery. That makes them America’s fastest dying industry, according to a new report from IBISWorld.”

Paul Bradley with Resident Owned Communities USA (ROC USA) was one of the first in the manufactured housing world’s leadership to publicly respond to this IBISWorld report. Bradley wrote a feature article for MHMSM.com that analyzed the IBISWorld report. Quoting from Bradley’s analysis:

“The (IBISWorld) report states ‘demand is dwindling’ and ‘sales are stagnant because the industry is not innovating, and that sales are likely to continue falling in the coming years.’ They go on to say, ‘Manufacturers have made cosmetics changes to manufactured homes, but they have not been significant enough to alter their life cycle stage.’ The report puts MH retailers in the ‘Industry stagnation’ category of declining industries.

“Are you kidding me? These are ‘deeply researched answers’?

“First, the headline clearly comes from their marketing division as a means of grabbing headlines. The research is not about a dying industry but a declining industry segment – one of two long-standing distribution channels in the business.

“With MH shipments in 2010 at 50,000 or 20 percent of 2000 levels, it’s not news that retailer revenues over that period declined. On that data, I’m surprised establishments are not down more than 56 percent. It suggests that the segment has excess capacity and additional closings are likely.

“Most surprising to me is laying the blame at the feet of manufacturers on the issue of design! From a ground-level market vantage point, that’s misplaced.

“The industry’s great declines came about as a result of, first, an industry-created chattel collapse where the seeds were sown in run-up to the 373,000 shipments in 1998. The collapse, and the repossession overhang which followed, began the decline like a skilled boxer’s well-placed left jab.

“The right overhand came next in the form of aggressive sub-prime and predatory lenders in the site-built market. In that run-up, traditional MH buyers – who were harder to finance for MH as a result of the chattel collapse – were lost to site-built housing in an eerily familiar boom market.

“Dazed by the right hand blow to our collective heads, the left to the body that has people reeling now is the regulatory reaction – the SAFE act, etc. – to the clearly consumer-eating lending practices of the last decade.

“The results of this three punch combination are declines of the magnitude widely reported and felt, and like a good whack, the pain lasts a while.

“Innovation in housing design, however, is not the industry’s chief failing.

“For those of us in the community market segment, in fact, innovation in new homes is a small issue – not a non-issue but a mere shadow of the aforementioned home financing issue. In fact, we are seeing demand for replacement and in-fill homes but only where we are able to arrange decent home financing. People want more efficient homes and the cost savings with new EnergyStar homes can be dramatic based on buyers with whom I’ve spoken.”

(Editor’s Note: The complete analysis by Paul Bradley can be found at this link.)

Other commentary in the form of articles proposed for publication, private and public comments followed. Thayer Long at the Manufactured Housing Institute issued this email as part of his response:

“State Execs & MHI Board:

“A very well articulated response to the IBIS report from last week by Paul Bradley which was just posted on www.MHMSM.com.

“I’d also just add that the sentiment at the Tunica Show, the Louisville Show, and the expected strong turnout at the Congress & Expo and the Tulsa Show and York Show later this month certainly don’t indicate this industry is going anywhere.

“Tony/Paul – I hope you don’t mind me sharing. We’ll see you in Las Vegas. Thanks for your support.

“Thanks-

“Thayer”

MHMSM.com spoke with Danny Ghorbani at the Manufactured Housing Association for Regulatory Reform (MHARR) and to Thayer Long at the Manufactured Housing Institute.

Danny Ghorbani stated in a telephone interview that his comments were not the official position of MHARR, but represented his own views on the IBISWorld report and related.

Ghorbani stressed that the IBISWorld report represented the “failure” of “the post-production sector of the Industry” [meaning, MHI] in “serving that segment of its membership.”

The MHARR official then referenced two previously published documents that do represent MHARR’s official position, which were previously published on MHMSM.com in August and October 2010. These MHARR Viewpoint articles called for ‘the post-production segments’ of the manufactured housing industry to form their own national association; a thinly veiled vote of no-confidence from MHARR towards MHI.

MHMSM.com spoke extensively with Thayer Long at the Manufactured Housing Institute (MHI). The typically soft-spoken Long was quick to respond.

Long was at times tongue-in-cheek, at other points direct in his comments about the IBISWorld report and Ghorbani’s often pointed comments on the matter. It should be stressed that Long’s comments, which follow, should be viewed as his own, and not necessarily reflective of the official view of MHI.

In an exclusive interview with MHMSM.com, Long shared the following thoughts:

Thayer Long:
“If it is a dying industry, then ok, then I guess I quit! And if Danny wants to blame it on us [MHI], okay, what else is new? … I am still struggling to figure out what he (Danny Ghorbani) is doing right now. Name one thing that he has accomplished … in the past three years? What has he accomplished…? I would love for you to think about that and get back to me. What has he accomplished? We [MHI] win and lose some battles. But at least we try. We have accomplished some things. Except, except, except… [MHARR]…nothing….

READ THE FULL INDUSTRY IN FOCUS REPORT

Indiana Manufactured Housing Association meets the SAFE Act

January 9th, 2011 3 comments

By new contributor Matthew J. Silver

Matthew Silver photoThe SAFE Act (Secure and Fair Enforcement for Mortgage Licensing Act) did not seem fair at all to the forty-plus attendees at the Indiana Manufactured Housing Association’s panel discussion on December 16, 2010 in Indianapolis, IN. Nor did it make them feel more safe or secure. Au contraire, many no doubt left feeling they were being singled out by a federal government regulation enacted in response to the mortgage lending crisis. The SAFE Act has created new challenges for the manufactured housing industry.

A significant SAFE Act requirement is for Mortgage Loan Originators (MLO’s) to take training and continuing education. MLOs also must undergo extensive background checks to become certified, register with the Secretary of State and with the Nationwide Mortgage Licensing System and Registry. These costs of the licensure process and related requirements present a financial hindrance, particularly for independent retailers and communities, but it certainly increases costs for compliance to everyone involved in lending and related activities.

The SAFE Act was part of the Housing and Economic Recovery Act (HERA) of 2008, and the law went into effect July, 2010. The states were given the responsibility to enact laws and enforce the regulations. But as Mark Bowersox, Executive Director of Indiana Manufactured Housing Association (IMHA), said, “The government has not issued a clear and definitive ruling on the intent of the regulation, but the bottom line is that only licensed Mortgage Loan Originators can discuss terms of a credit sale.”

Mark Bowersox, Executive Director of the Indiana Manufactured Housing Association opens the discussion by laying the background of the SAFE Act in Indiana.
Mark Bowersox, Executive Director of the Indiana Manufactured Housing Association opens the discussion by laying the background of the SAFE Act in Indiana.

Bowersox introduced the panel, which included Mark Tarpey, supervisor with the Indiana Department of Financial Institutions, charged with overseeing the enforcement of the SAFE ACT in Indiana; Carl Becker, Indiana Manufactured Housing Association’s (IMHA) lead attorney; and Ken Rishel, principal of Precision Capital, a manufactured housing lender and member of the Manufactured Housing Institute’s (MHI) Finance Committee, experienced working with federal regulations affecting the industry.

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Left to right:  Ken Rishel, Carl Becker, and Mark Tarpey. Tarpey said the DFI can look at hypothetical contracts, and based on current information, can say yay or nay as to the need for an MLO.

Rishel said unintended consequences often occur whenever laws are passed in a hurried knee-jerk fashion. This law originally was not thought to have much of an effect on the manufactured housing industry. It was supposed to get rid of the guys making phony applications and liar’s loans, not $20,000 loans on manufactured housing. But, Rishel said, “Nationally, it’s a mess. Each state has different regulations, making it especially difficult for owners doing business in more than one state.”

Citing the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), passed this year, Rishel said you do not see much reference to mortgage lending. “What you see is primary residence loans and primary residence lending. It blurs the distinction between chattel lending and mortgage lending. It also “…raises the cost of loan origination beyond the 6% we’re allowed to charge…. We figure it’s going to run around $4000 for a chattel loan. If a customer is borrowing $10,000, how can you add $4000 to this loan and expect the customer to pay? That’s crazy! Also, there are new requirements for appraisals that make it almost impossible to reach the standard they want for chattel loans.”

The soon-to-be established Bureau of Consumer Financial Protection, an agency inside the Federal Reserve System, with a surprising first year $500 million budget, is charged with protecting consumers from abusive financial products. It is assuming responsibilities from several other agencies, like the FTC and HUD, as well as the Dodd-Frank Act, and will eventually administer the SAFE Act. Said Rishel:  “Who are they part of, who do they report to? The Federal Reserve. Who runs the Federal Reserve? Ex bankers.”

The banks are going to take some hits on their credit and debit cards, he noted, but the fundamental issues of the banking business will remain, especially with the bankers in charge. As the new Golden Rule says, ‘Them that have the gold, rule.’

This new agency will be pro-active, not complaint driven. They will have agents looking for violators,” Rishel stated. “Who will they go after? It’s us, guys, we are the low hanging fruit. We have a lot of people engaged in this business who have been around for years, some are not legal, some are not compliant. If there’s five to ten billion in our loans out there across the country we’re going to be picked first. We are the low hanging fruit. There are others they will go after, but we’re easy, they may try to make their bones on our back. The car guys were nailed by this ten years ago.”

Elizabeth Warren is an Assistant to the President and a Special Advisor in the Treasury Department who is overseeing the development of the CFPB, and the possible new director. Rishel called Warren extremely anti-business. Indeed, some banking groups say Warren could hurt the availability of credit, especially to low income people.

As with much legislation enacted by Congress, the implementation and enforcement is delegated to others. Bowersox said this new agency is scheduled to be up and running by July, 2011. But there are many grey areas that need to be clarified, such as relating to pulling credit reports. The government asked for industry input on a proposed rule, but then did not consider our input for the final regulation, noted Bowersox. He said, “That final regulation has not yet happened, although here in Indiana our law went into effect July 1, 2010, to begin enforcing that final regulation that has not happened.”  The audience chuckled. The MLO regulation is being enforced, but other areas remain in limbo.

Several scenarios were raised by audience members, who were perhaps seeking ways to get around the new licensure statute. Attorney Becker replied: “You would have to appear in court, the judge would ask why you structured the document the way you did, and you would undoubtedly lose. Even if I represented you,” Becker stated, smiling. The attorney said if you have so much as a sheet of paper that displays possible credit rates on your counter that the customer can see, you may be in violation. You utter one word about financing or loan terms, you could be subject to substantial fines, as much as $25,000 per incident. For a company that processes multiple contracts a month, those sums can add up quickly.

Indiana and several other states were successful in exempting retailers who are only handing credit applications to customers. They will not be affected as long as they do not receive compensation for the referral to an outside lender.

Attorney Becker distributed an outline of very specific steps to take, according to Indiana law and the SAFE Act, if you want to structure a lease correctly. (footnote 1) However, this law has not been tested, and could very well be struck down by a future court ruling. Rishel said, “Based on Dodd-Frank, it is fairly certain the federal government is not going to allow RTOs and LO and LTPs to get out from under licensing when they implement their new rules.”

“As long as it is…a loan secured by a dwelling,” Mark Tarpey said, “it would fall under the SAFE Act jurisdiction and that would require an MLO. That’s the trigger, and until we hear otherwise from HUD, that is how we are interpreting this regulation.” He added: “In the past, if you sold goods or services on a retail installment sales contract, and you had more than 25 transactions a year, you were required to register with DFI. That will be gone. The only way you can get an MLO license with DFI or with the Secretary of State is to be tied to an entity, and that entity has to be licensed.” The entity can be an LLC (limited liability corporation) with only one employee, and that person can be the MLO.

Tarpey agreed it is unprecedented to give this new agency so much money and power, and suggested, “Congress may have to revisit this issue.” Meanwhile, “DFI began licensing mortgage lenders who were the named creditor and funder of first lien mortgage loans in January of 2009,” he stated. “Mortgage brokers who find loans for customers and MLOs who work for them are licensed by the Secretary of State. Table-funded loans are considered brokered loans (footnote 2) and are also regulated by the Secretary of State.”

When Tarpey was asked if anyone is under scrutiny or if any fines have been levied, he said no. “We have been trying to educate retailers and community operators since the law went into effect in July of this year about the SAFE Act. People have been compliant so far, and we hope that continues. We haven’t found any violations,” he stated. Mark Bowersox agreed:  “DFI has visited dozens of communities throughout Indiana but to my knowledge no penalties have been given.”

A couple in the back of the room said they have a ten unit manufactured home community, and they charge a flat 10% interest rate on the sale of a home on their lot. Rishel said the new agency will eventually find them and demand to see their books.

A member of the audience is asking the panel for specifics about becoming an LLC so they can provide loans according to the new regulations.
A member of the audience is asking the panel for specifics about becoming an LLC so they can provide loans according to the new regulations.

Rishel wrote in an email: “The first goal of the MHI Dodd-Frank Task Force, and my personal goal, is to get chattel lending treated differently than real property lending because it is different. Chattel lending on manufactured homes should have never been included in the SAFE Act, and does not belong as part of the SAFE Act, as the burden of licensure is too odious and too costly for the dollar amounts involved, and for those who make up the majority of those lending in this manner. Exclusion of chattel lending from both the SAFE Act, and other laws aimed at real property lending, should be the first and primary goal of the Task Force. Any other action should be secondary or a fall back action.”

To this end, Rishel strongly implored the members of IMHA to stay in touch with their association. He and other members of MHI (Manufactured Housing Institute) paid attorneys out of their own pockets to research the new laws. “We will be coming up with a plan, probably in January, contacting the state associations for support in trying to sway Congress to make amendments to these regulations before this new Consumer Financial Protection Bureau gets going. You will be asked to contact your senators and members of Congress,” he told those assembled. When the changes are made at the national level, you will need to weigh in on your state representatives to change state law accordingly, he added.

Rishel sounded a dire prediction: “We should have seen this coming. This is critical. If we walk away from Dodd-Frank, three years from now we will not have a lender in the industry. This is life or death for the whole industry. We need to pull together and get the exemptions we need.”

Certainly, while Mr. Rishel’s points were compelling, the thrust of MHI and the various state associations is precisely to prevent that from happening. This is one reason why Rishel and others strongly encourage actively engaged association membership. It is strength in numbers that can get and keep the manufactured housing industry moving out of such irksome challenges s Dodd-Frank and the SAFE Act. What is obvious from a meeting such as this one, is that without good legal counsel, which is far more expensive than association membership, the risks faced by an independent retailer or community operator are now too great to ignore.

(1) Indiana manufactured Housing Association members can see the attached file, Basics on Lease to Own, or contact Carl Becker for more information. (317) 598 4529

(2) A lending method employed when a loan originator does not have access to the money necessary to make loans and then hold them until it has enough to sell on the secondary market. As a result, the originator forms a relationship with a lender who provides the funds for closing and immediately takes an assignment of the loan. This is called table funding. Under regulations of the Department of Housing and Urban Development, table-funded loans must disclose service release premiums–profit received by the originator–on the loan closing settlement statement. Loans sold on the secondary market do not have to make those disclosures.

Photos by Matthew J. Silver, free lance writer

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Why is Louisville so Important?

December 14th, 2010 No comments

Until only in recent years, the heartland of America has been the center of the market for low and moderate income families who have a special fondness for manufactured housing as a viable alternative to less affordable site-built housing.

Photo from Louisville Manufactured Housing Show

From the Northern reaches of America’s breadbasket in the Dakotas, Wisconsin and Minnesota to the south-central states of Kentucky and Tennessee, with strong central Midwestern states representation by Illinois, Indiana, Ohio and Michigan, manufactured housing has appealed to both urban and rural home buyers; this in spite of the many myths about wind safety aspects of factory built homes. Some of our finest retirement communities have been built around many Midwestern urban areas, such as Chicago, Detroit and Michiana. So-called modular homes built to the wide-ranging, ill-defined state codes, hasn’t had the impact here as they have in Northeastern, New England and Mid-Atlantic States.

Is it the affordability? Is it the prices? Is it the home designs? Or is it just the relative ease with which so many Mid-American families find manufactured housing a good value? I guess only an expensive survey will tell, but who cares?

Photo from Louisville Manufactured Housing Show

For many years running, the most successful of showcases for our uniquely American form of housing in mid-Western markets has been the Louisville Show. Coordinated by Showays’ Dennis Hill, it has a reputation for not only putting on a great physical display of the latest in home designs by top manufacturers, but it also provides the many attendees with a wide range of products and services that support these unique homes, ranging from the latest in home financing options and home insurance, to new innovative products for safely installing homes, accessories to supplement the homes, and the latest in insurance, wholesale and retail financing programs.

The show is popular not only with retailers and developers, but with their staffs, installers, salespersons, and suppliers. The introduction of many new innovative concepts in HUD code and Modular homes have started trends in the industry that are prevalent today. A highlight of the show is the many seminars and industry speakers bringing timely subjects to the industry.

January’s 2011 show will also offer insightful seminars that can help you grow your business or address specific needs. In addition to the many homes and booths, the conference speakers will share their decades of experience for those who attend.

  • George Allen will be presenting his “Ah Ha! Oh, No” formula for calculating the ideal pricing of homes and site for long term success.
  • Ken Rishel will be presenting a must-attend topic for many who are looking for new sources for chattel financing. He should call it, “Yes, you can!” with captive finance. But whatever the title, it is good material that every community owner needs to hear, and many retailers should listen to as well.
  • Don Westphal has become the go-to guy on the topic of Community Series Homes as well as being the stand-out man when it comes to development or redevelopment of a community.
  • Bob Stovall and L.A. ‘Tony’ Kovach of MHMSM.com fame will be presenting their marketing magic ideas for driving traffic to your retail or community locations. Check out their “Dominate Your Local Market!” presentation. I saw Tony’s talk on a similar theme in Phoenix, and gave him a 10 out of 10.
  • Finally, I will be presenting an intro on site and an off-site presentation on how you can get manufactured housing community financing or refinancing – yes, even in today’s more challenging lending environment. ‘Tony’ Kovach will act as moderator for this off-site event, with Bedford Lending being present to help with a little-known, but very valuable FHA 207m private lender loan guarantee program. Learn more or sign up for that seminar at this link. This important seminar is to be held for from 1:00 to 5:00 p.m. the afternoon of Thursday Jan 13th at the nearby Louisville Crown Plaza hotel, which is adjacent to the Exposition Grounds, and is easily accessed by car or the shows’ internal transportation system.
Photo from Louisville Manufactured Housing Show

More than ever before, the MH industry needs to gather up our resources, spruce up our thinking and light up our resolve to bring new life to a waiting American public. With all our Nation’s problems associated with high unemployment and large numbers of foreclosures, manufactured housing homes look even better than before as a real, viable alternative to more expensive site-built homes. New financing programs like the FHA Title I program, existing programs like the FHA 207m community financing program, and green home building options being offered by some manufacturers are concrete proof of our commitment to the general public in bringing safe, affordable, functional housing to Americans. There is an energy and opportunities aplenty to learn at a manufactured housing show that you simply can’t get any other way.

And it will all start in 2011 with the Louisville Show. I’ll be there, and I hope to see you there too!

Editor’s Note: Photos of the 2006 Louisville Show by Edward ‘Eddie’ Hicks

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By Eddie Hicks
Consultants Resource Group
Lic. RE Broker, Lic. Mortgage Broker
(813) 661-5901 Office
(888) 264-6472 Toll Free
www.mobilehomepark.com/
www.factorybuilthome.com/
www.Interlokhome.com/

FHA207(m) Loans for M/H Land Lease Communities Seminar

It is Time to Stand Up and Be Counted

July 20th, 2010 No comments

By Ken Rishel

Anyone familiar with the Captive Finance Newsletter knows I have very little faith in any government backed chattel finance program coming to fruition or, if it does, being the answer to the manufactured housing industry’s prayers. If it happens, it will only double the current sales volume and that is not enough. However, it is worth some effort to try to make it happen because doubling industry sales is an important thing, even if it isn’t the whole answer. While I still believe that owner assisted financing is the real answer, I am asking you to join me in a last ditch effort to help MHI in their efforts to make this thing work.

For those of you who don’t know, MHI made a plea last week at their Summer Meeting in Washington DC for industry members to email the government and their Congressmen and Senators asking FHFA to not ignore their duty to serve. Greg O’ Berry of Hometown America went even farther and suggested both at the MHI meeting and in this ezine that community owners and operators ask their residents to also email everyone explaining that the value of their investments in their homes would be adversely affected if government backed chattel financing did not come to fruition.

Because I am skeptical about this program ever emerging and because I am so focused on more complete solutions, I have not lifted a finger to help. I have however, come to realize that is the wrong attitude. Nothing is ever won by people finding fault, or not trying to make something work, and I now do not want to feel as if I did nothing when something could make a difference. This manufactured housing industry is something special, and all of us owe it more than we can ever repay. We just need to realize it, and pay up in some measure. I know that, because that is what has kept me running 16 hours a day while being called a fear merchant for the last several years, when I could have been on a beach in Hawaii watching my wife learn the Hula. I know it, but I didn’t act on it when it came to this issue. I am ashamed of my lack of action. To those of you who have already gotten involved, I apologize for my lack of action.

Perhaps it was Greg’s impassioned plea, but it struck me that all of us in this industry, no matter how cynical, could at least stand up and be counted on this issue. As a result, I am emailing everyone that makes sense tonight ( FHFA, Congressmen, and Senators) after I finish this article to you. My question is, “What are you going to do”? Will you make the same effort after reading this? Will you reach out to others and persuade them to do the same? If you are a community owner, operator, or manager, will you follow Greg’s lead and ask your residents to do the same? Will you stand up and be counted?

Ken Rishel of Precision Capital Funding is a leading expert in chattel financing of manufactured homes and in starting and running owner assisted finance operations. His organization was named MHI’s Service Supplier of the Year for 2010, and he authors and publishes the Chattel Finance Newsletter which goes out to over 9,000 people on a monthly basis.

Ken Rishel report on the Manufactured Housing Roundtable

June 3rd, 2010 No comments

Precision Capital Funding logoMr. Rishel attended the June 2 Manufactured Housing Roundtable in Elkhart, Indiana regarding FHA Title I and Title II lending. It was a national
meeting hosted by Congressman Joe Donnelly from Indiana, MHI, and MHARR.
Every affected government agency was represented by their top people.
Attendees also included the top people from national industry lenders, the
owners of various manufacturers, industry consultants, and major community
owners Mr. Rishel will cover this meeting in his upcoming June newsletter.
Below, you will find the letter he wrote to Congressman Donnelly as a
result of this meeting.
submittd by Juline Anderson at CaptiveFinance.net


The Hon Joe Donnelly
207 West Colfax Avenue
South Bend, IN 46601

Dear Mr. Donnelly:

I first want to thank you for the time and attention you have given to the issues of the manufactured housing industry and for the time you put into the meeting at Elkhart, Indiana on Wednesday, June, 2nd. As I’m sure you gathered from the attendance, while this issue is important to your constituents and the area you represent, it is also of national importance. You are to be commended for your leadership role in addressing both the issues of government assisted financing of manufactured homes and the unintended consequences coming from the mandates of the SAFE Act.

As a longtime member of the manufactured housing industry who will not directly benefit from any positive efforts coming out of FHA financing, I still feel the importance of industry access to this type of financing, As a result. I am writing to share my view on what came out of the meeting in Elkhart, and how your role will be critical in achieving results favorable to your district and the entire nation.

I came away from that meeting with the feeling that the critical agencies represented were there because they had little choice and they were hostile to engaging their agencies in chattel (personal property) finance. I believe their reasons are as follows:

  • The histories of chattel finance of manufactured homes are replete with failures and losses.
  • While they are loath to admit it, they lack the experience and knowledge to correct the problem.
  • Like any government agency at the state or federal level change is difficult, especially if it requires taking direction or assistance from the private sector.

I surmise it is easier for them to resist their duty to serve by subversion partly because they have convinced themselves that it isn’t possible to successfully make chattel loans on manufactured homes and not lose money. If this assessment is correct, their attitudes will condemn Title I to failure before it has an opportunity to succeed.

It was mentioned numerous times that the specialty lenders have attempted to share their data on loan portfolio performances with these agencies without much success. If they actually analyzed the data, the truth would soon become apparent to them and I believe they have minimized this data as a way of continuing in their beliefs rather than face the truth of their inadequacies.

Here are some truths about manufactured housing chattel finance:

  • At least three times in the history of the industry, greed coupled with incompetence has led to spectacular meltdowns and failures of manufactured home chattel loan portfolios.
  • Banks and Credit Unions are very wary of chattel loans for manufactured homes partly because they lack experience and expertise and partly because their regulators discourage such lending because so many institutions have lost money making these loans.

Yet,

  • I, and the companies I own or represent, have never lost money making chattel loans on manufactured homes. None of our investors have ever lost a penny either. We have helped banks, credit unions, and insurance companies build some of their most profitable portfolios, as well as pension funds and thousands of private investors.
  • Triad Financial Services, represented by Don Glisson Jr. at the meeting in Elkhart is a 50-year-old company that until about 12 years ago made only chattel loans on manufactured homes has had a stellar history of loan portfolio performance. (They now also do mortgage loans for manufactured homes and own a subsidiary company approved to do Title I and II.)
  • Warren Buffet bought Clayton Homes in order to acquire their finance arms that were engaged in manufactured home finance.
  • Jim Clayton utilized a considerable part of the funds he received from Warren Buffet to start a bank that is very active in manufactured home finance on a national basis.
  • There is over five billion dollars in chattel loans currently that are being made through captive finance organizations funded by the owners of manufactured housing communities and retailers. The people that sell these homes are, in effect, putting their money where their mouth is. Two organizations, Precision Capital Funding and Origen/ManageAmerica are helping them do it (our method is very hands on while theirs is through purveying documents and software) and while I cannot speak for the second organization, I believe they, like Precision have extensive records on performance that would put the older federal histories to shame.

What is the cause of this disparate performance history? To understand means one has to accept the premise that loaning money for chattel loans on manufactured homes is a very specialized area of lending that requires special knowledge and expertise to do it successfully. This knowledge starts with setting up a system that has sufficient safeguards to eliminate dishonesty that is more than just a paper solution.

An industry specific credit matrix is also critical. There are reasons beyond just the four Cs of credit that affect loan performance that are unique to chattel lending on manufactured homes that must be taken into account when considering a loan, and I believe these are totally unknown or undervalued by most organizations when they begin to make these loans.

Because of the nature of the typical borrower, servicing properly must be different than servicing for a typical site built home. Proper servicing can lower nonperformance rates dramatically.

The replevins process also needs to be industry specific because the approach to the process can critically affect both the costs of replevins and the performance of the collateral. The current process in FHA rule is typical but is myopic and costly.

Collateral performance is critical to the whole of the transaction. The lower the cost of cleaning and refurbishing the better for the portfolio. The higher the dollars recovered the better the portfolio performs. It is a given there will be repossessions, but it is not a given that repossessions mean overall losses.

There was some offering of industry financial participation in loss prevention from several of the attendees that basically went unheeded by the government agencies. I would consider this a critical component to the success of any loan program for several reasons.

I believe these agencies will need legislative pressure or mandates in order to take this issue seriously. If they started thinking how they could make chattel finance for manufactured homes work instead of thinking, “it can’t work”, that would be a start, and this is something you can accomplish if you feel it is appropriate.

I would further suggest they recognize the people and organizations within our industry that could provide them with invaluable expertise and information in all of the key areas discussed in this letter. My suggestion would be to work through MHIwith the goal of getting Don Glisson Jr. of Triad Financial Services to head whatever effort should be made.

Through my work as the former Chairman of the Illinois Manufactured Home Quality Assurance Board and other governmental associations, I recognize the difficulty of any government agency implementing rules, policies, and procedures that originate from outside the agency itself. Perhaps an advisory board could be created consisting of industry lenders and consultants that were properly vetted and authorized to recommend policy and procedures that would assure the success of a chattel lending program, as well as supply historical performance data that could and should be utilized in formulating appropriate loan policies and mathematically modeled credit matrixes that actually work. In addition, that data would allow a proper reserve fund to be created to absorb any shortfalls as a result of non-performing loans to help assure no loss of taxpayer monies.

Should you want or need further information from me, I stand ready to assist you in any reasonable way I can. Again, I want to thank you for your attention to the manufactured housing industry and the people affected by your assistance. Please be assured that I will in the June issue of The Chattel Finance Newsletter, inform my 9,000 plus readers of your positive assistance to our industry both on the finance issue and in regard to the SAFE Act, giving you the credit you deserve for your efforts.

Respectfully submitted,
Kenneth Rishel

Kenneth Rishel
Precision Capital Funding
Publisher of The Chattel Finance Newsletter
(217) 971-3968
kennethrishel@captivefinance.net


For more information on this important issue:

FHFA Proposes Rule on Fannie Mae and Freddie Mac Requirements for Underserved Markets

Summit Meeting Addresses Industry Finance Issues

Stage Set for Action on Title I Moratorium

Long-Awaited “Duty to Serve” Proposal Unveiled

Ken Rishel report on the Manufactured Housing Roundtable