Industry Voices

Wow! What a fantastic Louisville Manufactured Home Show! Since I had not been to the Louisville show in over a decade, I did not know what to expect in terms of attitude and atmosphere. If you were unable to attend, let me tell you that you missed a fantastic opportunity to network with some amazing and knowledgeable industry professionals. The excitement and optimism set the stage for an electrifying atmosphere. Whether your company is in retail, communities, manufacturing, finance, insurance, service or supply there were people, tools and resources available to help you succeed and grow. Various workshops, forums and seminars were conducted by some of the industry’s best and brightest.

An MH Industry Turn Around Plan, Part II

It sounds like Triad Financial Services is making its biggest single-day rate cut in that company’s 50-year history. A reduction of .75% for all categories of loan products for MH’s in parks to take effect immediately, according to a TFS insider. Rate sheets will be out soon reflecting this new change.

This news came out barely two weeks after our industry’s other lender, CU Factory Built, rolled out its new “step-up” loan with very low rates starting at 4.5%.

This is a typical reaction among our MH chattel lenders who are competing for top-tier borrowers (which means borrowers with 700+ credit scores). Without having seen rate sheets, it cannot yet be confirmed if this rate reduction from Triad will affect all tiers of their loan products. However, the source for this story did indicate that the .75% reduction will be “across the board”.

We now have very attractive rates to offer to manufactured home buyers moving into parks. Four years ago, the “floor rate” with our biggest lender was at 10.5%. We can now potentially offer rates less than half what they used to be.

After years of sour news, this is something that should be told to all buyers of manufactured homes in parks. Check back frequently for the latest in this “rate war”.

####

Submitted by
Dave Shanklin
NMLS # 314463

CU Factory Built Lending, has again rolled out a new loan product with eye-popping low rates for manufactured homes in leased land communities. This leading industry’s lender provided this out of their Seattle office.

Their new floor rate is 4.5%. This is a “step-up loan”, not an adjustable rate loan. The low starting rate is locked in for the first five years, then “steps up” to the higher rate for the remaining term at 7.25% fixed.. This lender’s loan products are always fully amortized. The terms are very flexible and not too difficult qualifying; for example, a guideline that there be no mortgage defaults.

For example, a used 1980 multi-sectional in-community home-only could qualify with 10% down. Assuming top tier credit, the applicant can get a 20-year loan at 4.75% for the first five years, and 7.5% for the remaining 15 years. With 20% down, the start rate would be 4.5%, stepping up to 7.25% after 5 years.

Better yet, for a 10-year loan, with 20% down, the first five years will be fixed at 4.5%, and the remaining years fixed at 6.25%. The borrower may pay the monthly payment based on the higher rate, resulting in an accelerated principal reduction, and saving thousands in interest.

We are told this new “One Step Program” loan product is available in all CUFBL states. Cash-outs and refinances are also eligible, case-by-case. In CA, the older “pre-HUDs” are eligible, but with a 1% rate adder.

This will make financing new and used MH chattels much easier. Our industry needs a good shot in the arm. # #

post submitted by:

Dave Shanklin
Mobile Brokers Acceptance
(916) 962-7128

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

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

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

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

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

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

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

The industry needs to go forward, not backwards.

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

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

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

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

A Conversation with Kathleen Maynard, CMHI

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Attached for your information and review is a copy of a Executive Order regarding federal regulation just issued by the White House on January 18, 2011. The Order, released in conjunction with a companion Wall Street Journal article by the President on over-regulation, marks a major policy shift by the Administration that has implications for manufactured housing as a federally-regulated industry.

In fact, it appears this Order almost could have been written with the HUD Code manufactured housing industry in mind. Its focus is on promoting the type of fair, reasonable and open regulatory environment that the HUD Code industry needs to thrive while serving consumers of affordable housing. Among other things, it states, as Administration policy, that the federal regulatory system, while protecting health and safety, must also advance “economic growth, innovation, competitiveness and job creation” through an “open exchange of information” that includes “affected stakeholders” – exactly the opposite of what is happening today in the HUD program.

Consequently, after carefully examining the Order overnight, MHARR, on January 19, 2011, acted to press HUD officials to fully comply with this Order as it relates to all aspects of the federal manufactured housing program including, most importantly, its ongoing rapid expansion of in-plant regulation. This expansion, which began innocuously as a program of “voluntary cooperation,” is now being transformed into a full-blown de facto regulation that will needlessly increase regulatory compliance costs passed to consumers by manufacturers and retailers, as the ongoing expansion now appears to target both. Details of the latest phase of this expansion, developed entirely behind closed doors, are emerging piece-by-piece, having been adopted without any official procedures.

All of this is addressed in detail in the attached copy of MHARR’s self-explanatory January 19, 2011 MHARR letter to HUD Assistant Secretary-Federal Housing Commissioner, David Stevens, a copy of which is attached for your information and review. This letter addresses the ways that the President’s January 18, 2011 Order applies to – and must alter – the practices of both the HUD regulatory program and HUD’s consumer financing programs, specifically including the FHA Title I manufactured housing program, which has been subject to severe limitations which thwart competition and market growth.

We urge you to carefully review this package, as it provides details of the latest phase of HUD’s ongoing expansion of regulation – mandatory three-day audits and costly enhanced Subpart I involvement by third-party inspectors – that are on-course to be imposed on manufacturers and retailers, because the industry establishment in Washington, D.C. refused to join forces with MHARR in order to force HUD to comply with the law by going through consensus committee and rulemaking procedures. Now, as shown by the attached letter, the industry has a major task on its hands to try to stop this.

MHARR, therefore, in an effort to curb and reverse the course of this runaway expansion of in-plant regulation, will now include and use the President’s Order and its January 19, 2011 letter to HUD in its overall ongoing activities with the 112th Congress, to demonstrate how HUD is violating the Administration’s own policy.

We will continue to keep you apprised as new developments on these issues unfold.

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

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.

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?

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 13^th 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.

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

##

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

As a 39 year industry veteran, I have always been a sucker for industry shows. I hear arguments that with the industry shipments down that we should cancel the shows and focus on survival. While I have significant experience focusing on survival, I believe industry shows are a way to send the message out that we will not be beaten down.

My career in the industry began in Georgia in 1971 where I remained until moving to Texas in 1983, followed by a move to Oklahoma in 1988. For many of those years in Georgia, a high point of the year was making the journey to Louisville, in horrible January weather, to go to the Louisville Show. Why was that trip important to me despite the cold weather and taking time away from my own business? The opportunity to see new innovations as they were being introduced, instead of months later; the chance to visit with industry friends that have come in from vast distances across the country; the potential of finding a new product line before my competitor saw it, and the benefit of being able to learn and grow at the industry seminars that were always a part of the event.

My last trip to Louisville was in January 2008, which happened to be the 50th anniversary for the show. I can again say that I enjoyed the trip and even picked up a new product line while I was there. I can’t say that for absolutely sure I will make it to the 2011 Louisville show. I can confirm that I will do my best to do so.

I have had the pleasure of serving as chairman of The Great Southwest Home Show for the third year running. Like Louisville, The Great Southwest Home Show is held in an indoor facility (The Quick Trip Center). No rain problems during set-up, show days or tear-down. No generator rentals or air conditioning expenses for the manufacturer exhibitors. The Tulsa show is located at almost the geographic center of the United States and is serviced by several major airlines including Southwest. The 10.5 acre Quick Trip Center is also configured in such a manner to provide adequate security to allow for several days of Public Days following the retail period of the show. Supplier exhibit booths are conveniently located in and amongst the area where the homes are displayed.

Retailers, especially in the states contiguous to Oklahoma should not miss the opportunity to travel a very short distance to experience the thrill of seeing a huge display of exciting homes all located under one roof at one time. The educational seminars are a bonus. A bonus we got as an industry last year was that HUD brought its staff to Tulsa and held the meeting of the Manufactured Housing Consensus Committee (MHCC) in Tulsa in conjunction with The Great Southwest Home Show and Oklahoma’s state convention for the Manufactured Housing Association of Oklahoma (MHAO). The show and convention were enthusiastically received by both HUD staff and by MHCC members and the newly appointed Associate Deputy Assistant Secretary of HUD, Teresa Payne was the keynote speaker at the MHAO convention. The opening remarks by Teresa Payne at the next MHCC meeting held in Washington DC were to express thanks for having had the opportunity to hold the meetings in conjunction with the industry events in Oklahoma.

I believe we should support all of the industry shows that we can possibly attend. In addition to attending The Great Southwest Home Show last year, I took the time and the travel requirements to attend the Tunica Show and I enjoyed every minute of it. I will do my best to do so again in 2011, just as I said I would for Louisville. As industry members, I believe we should support and attend all the shows that are within reasonable travel access.

##

Doug Gorman, President, Home-Mart, Inc.
Manufactured Housing Consensus Committee Member (MHCC)
Manufactured Housing Education Institute (MHEI) board member and past chairman
Manufactured Housing Association of Oklahoma (MHAO) board member and past president
Award-winning retailer in Tulsa, OK