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Re-assessing the Stabenow Amendment to Extend Energy Star Tax Credits

April 13th, 2012 2 comments

Hi Tony,

As you know, the Stabenow Amendment to Extend the ENERGY STAR Tax Credit for Manufactured and Modular Homes Defeated in the Senate. As a retail salesperson some reading this will say I’m only interested in my own good. But not only do I believe the Amendment should be passed but I think it should be expanded.  I am talking about a program where the federal government offers a tax credit to customers who purchase an energy efficient manufactured home. 

There is currently no tax credit for energy efficient manufactured homes.  In spite of the so many in the U.S. government saying it wishes to create more manufacturing jobs, increase home ownership, stimulate the economy (home owners make more purchases than just a house), decrease banking instability, decrease consumers debt load, increase energy efficiency and lower dependency on foreign oil imports, some in the federal government are missing the benefits of manufactured housing and the ability to kill 10 birds with 1 stone. Factor in as well the potential to export our homes to other countries too.*

The only credits available are to home owners from local utility companies, but Louisiana does not currently have such a program. While in some areas we lead the country in tax credits for things like solar energy, we offer nothing to someone that is currently living is substandard housing who’s income is too low to qualify for a loan – due to debt to income (DTI) ratios rather than credit scores – to improve their living situation.

Consider someone that owns a home that is inefficient and or hazardous and would like to upgrade, but to do so would require taking the house down to the studs and starting from scratch.  Banks are reluctant to lend for such major changes, especially if that is the collateral for the loan and merely increasing energy efficiency does not increase the value of the property enough.

Lets mention the fact that banks often charge higher interest rates on land/home deals simply because the home owner is buying a manufactured home effectively pricing lower income people out of the housing market and condemning them to substandard housing that is energy INEFFICIENT.  

If the same effort where put into upgrading access to American made homes that was put into upgrading autos (most of which were not even manufactured on U.S. soil) through “CASH FOR CLUNKERS," oil dependence could be halved in a few years.  

I wonder why no one has filed a class action law suit on behalf of the low income consumers everywhere. Basically they are being forced to pay higher utility bills because they can not pay the $70 – $120 per square foot cost of existing site built homes, or the still higher costs of new conventional on-site construction.

Sometimes worse yet they may effectively be forced to obtain housing through Section 8 housing programs, to me this smacks of discrimination and blackmail.  

Where is rhe logic to say to someone on a low or fixed income that you can afford a $300 – $500 monthly energy bill, but not a $500 new home payment that could help limit our dependence on foreign oil? Or you are effectively saying in some case that you will have to leave your A/C or heat off if you would also like to have food…this is unconscionable.  

I think that every dilapidated house that could be replaced with a new, energy efficient manufactured home not only helps the individual but the economy and the country.

As someone that works for a manufactured home retailer, I know that we are the front line in this battle and when I am ordering a home for a customer the very first thing I do is try to sell them on upgraded insulation and energy efficiency. I have gone so far as to order an upgrade on insulation without charging the customer. Needless to say this is not always encouraged as it cost the dealership money, and since it is not my money I may have little choice in some deals. I have had customers that have chosen not to pay the additional cost even though they know it will save them money in the future.  But if we offer the right incentives it would make it easier for the customer and I imagine the builder, if everything was Energy Star.  That would actually be easier to sell than the current “hit and miss." That is why I think if a program could be put together that offered incentives that would encourage dealers, banks, governments, electric companies, insurance companies and consumers – beyond what is currently available – we would have much more success than any stand alone program.

If you look at a model where you have a customer who has marginal credit, marginal debt to income, marginal down payment, and currently living in a free and clear home that is 50 years old that averages a monthly light bill of $300-$500, on the surface a bank may say no to a loan based on this customer. But if you could add a CREDIT for down payment from the state and federal government and local utility company, then figure in a credit on DTI for savings on energy bills and a lower interest rate base on an energy DISCOUNT.

Such steps could improve numerous customers lives, adding comfort, space, ease of bill paying, possibly increased health benefits, and while debt load is increased on paper you have reduced $200-$300 a month in energy payments, and reduced oil imports. You also have increased American production with American material and workers.  All of which could mean more business, and may also lead to higher values for resale, repossessions or land/home values.  All of this maybe even reduce or eliminate some of the “mobile home” stigma. 

Being a pair of “boots on the ground” I see some of what we are up against. Every time we turn around there are more rules and regulations against manufactured housing because people don’t understand, have prejudices, and have no incentives to do anything different.  So instead of manufactured housing helping solve some of the lower income housing problems, it just becomes harder to do anything.

If the factory built housing industry did a comparison between a normal 30 year old site built home and a new manufactured home (not even Energy Star) the energy savings would be outstanding.  Then if you take into account the number of 40-50 year old site built homes (circa 1960’s, or older) it would be even greater.  Then when you take into account all of the systems inside of a home that use or save energy and the shipping of materials, the construction of 1 manufactured home has far greater reach than someone who upgrades the insulation in an old home, and every new HUD code manufactured home is inspected and federally certified.  

Imagine if we could find a way to say to a customer “Sir if you spend X dollars for an upgrade it should save you X dollars a month and because of this the bank will allow a 10% increase on your debt to income ratio for buying and/or a credit on you down payment and/or a lower interest rate. Plus the federal government will give you an upfront credit that can be applied to your down payment.  And if you demolish or recycle an inefficient home the utility companies will match that grant.  FHA Title II loans already require that if you are replacing an existing home on a property it must be demolished or utilities be cut off.  Ultimately I would like the Federal government to give homeowners the option and an incentive to save money by purchasing a Energy Star certified manufactured home. Where you could legitimately say to a customer if you purchase a home with these things you would:

  • A) saves money on your electric bill;
  • B) your builder, energy co. and bank participate in a program that offers a grant applicable for down payment for buying Energy Star;
  • C) reduced DTI because you will be saving on electric cost (all participation would be voluntary);
  • D) the government will give you a tax credit for buying energy efficient.

Think of a comprehensive nationwide program that would be voluntary but not piecemeal from one state to the next, with a more definite framework. If you want it, it exists. If you don’t want it, you don’t have to participate.

All of these ideas should accomplish several things depending on the size of any program.

  • First, helping marginal customer get new homes.
  • Second, help low income customers have more disposable income.
  • Third, lower debt ratios for low income households.
  • Fourth, ease overvaluation of real estate.
  • Fifth, eliminate inefficient buildings from the power grid.
  • Sixth. recycle parts of demolished structures (perhaps for the needy, homeless, or veterans).
  • Seventh, increase American dream of home ownership.
  • Eighth, increase US manufacturing and jobs creation.
  • Ninth, save oil and other energy sources on a national level (including transportation of materials).
  • Tenth, eliminate costly weather delays for construction.
  • Eleventh, lead to a recycle business for old manufactured homes.
  • Twelfth, helping customers who currently can’t buy because:

> they spend any down payment on current inefficient homes;

> they have difficulty budgeting for a home because energy cost currently eat up most of their disposable income;

> customers who genuinely want to help the environment and the economy. (in the past 10 years I have seen these customers gain in numbers).

It would seem like this would be a WIN/WIN/WIN/WIN situation.  It is hard to see any down side if everyone looked at all this carefully and got on the same page.  Even contractors of site built homes can benefit if it resulted in more land/home deals with improvements on manufactured housing.  

Thanks

Blaine Gilless
Ad Mgr
Lane Thomas Housing, LLC
1955 S. Morrison Blvd
Hammond, LA 70403
985-542-5420
Blaine@LaneThomasHousing.Net

* Editor's note: at the recently concluded MHI Congress and Expo, a pair of Russians were in attendance, interested in U.S. style factory building for their country. Another attendee wanted to learn about export opportunities for American made panelized homes. 2% of MHProNews.com readers are from Latin America, Europe, Asia, Oceania and Africa. Communications with them reveals they are seeking information on investment or factory built home opportunities.

Readers are encouraged to sound off on factory built housing related issues, and can send submissions tony@mhmsm.com with Industry Voices Guest Blog in the subject line. Appropriate posted comments on such topics that are topic focused (as opposed to self-promotion) are encouraged as well.

Electrifying Event!

January 20th, 2012 No comments

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.

 
Hopefully, a similar line up and opportunities will be available at the Tulsa and Tunica Shows in March.
 
My role as an industry observer that sought information for a doctoral dissertation enabled me to interact with professionals from different segments. As always, it was nice to see old friends from my own days in manufactured home retailing that have weathered the storm of the housing downturn. It was also an honor to meet and network with industry professionals that shared their knowledge and experience. Their presence is proof that companies have recognized the need for change and are proactively adapting to the market.
 
One of the common themes among show participants was the need to attract better quality buyers and develop strategies to compete with traditional site built homes.
 
The mindset seems to be shifting from targeting customers with marginal credit and limited choices to ones that can afford a traditional house, but who can be introduced to appreciate the value of a manufactured home. Of course, that is not suggesting that used homes or the 'traditional' manufactured home buyers have no place in the market because they certainly do! However, a long term plan must include a strategy for targeting prime customers as well as marginal customers.
 
The manufactured housing industry is consumer driven, meaning that consumer wants, needs, and ability to purchase are determining factors in strategic development. All of the segments of our industry exist to fulfill the housing needs of a customer.
 
One of the main disconnects in our outreach seems to be in the sales, marketing, delivery, and after sale communication strategies. According to Margarethe  Kusenbach's Salvaging Decency: Mobile Home Residents Strategies of Managing the Stigma of 'Trailer' Living published in Qualitative Sociology (2009), the negative stigmatization of living in a manufactured home influences a consumer’s buying decision. In order for the manufactured housing industry to flourish, the consumer perception of the product must change.
 
How is that accomplished? In part, by researching other industries to determine strategies that have been effective and implementing them to improve weaknesses. Although this requires changes at all levels, it can be done. Look no further than the motorcycle and RV industries for inspiration about how change in customer approach can change the perception. One approach I recommend exploring is the MH Alliance/Phoenix Project plan, that I reviewed last year.
 
A strategy that will not likely be effective is waiting for the government to step in and “save” the industry. Without going into a political tirade, the bottom line is that the manufactured housing industry does not have the resources to heavily influence legislation. This certainly effects financing options, especially with the lack of the secondary market. While the secondary market may be marginal to non-existent, the manufactured housing industry has something much more powerful – the PRODUCT! Industry professionals have shown their dedication and passion. Now is the time to get creative about competing with traditional housing.
 
As noted above and in my previous articles for MHProNews.com, I am currently working on my doctoral dissertation as a requirement for the PhD designation. A doctoral dissertation is a long, tedious journey that involves identifying a business problem and researching the background and possible solutions. With over a decade of experience in the manufactured housing industry, my biggest obstacle at this point is narrowing down the problems and focusing on a specific issue.
 
Among possible dissertation topics, obviously, consumer perception can be considered one of the most important issues to resolve. Another potential focus is customer relationship management. Are retail dealerships and manufacturers using effective strategies to overcome and change consumer perceptions? Are some traditional marketing and sales approaches outdated? Would after sale communication help resolve the stigmatization and improve referral rates? Does the HUD code enable financial institutions to discriminate against manufactured housing? Any feedback and suggestions for a doctoral dissertation would be most appreciated. Please email me at lisa.tyler@waldenu.edu with any comments.
 
The 2012 Louisville MH Show was a positive – even electrifying – experience. Many I spoke with are already planning to attend next year's event. Will you be there? # #
 
Lisa Tyler
Walden University
 
 

This makes my blood boil…

January 14th, 2012 1 comment

… about the USFA's (United States Fire Administration) "fact sheet" about "manufactured housing."

Stuff like this makes my blood boil and I had to respond thusly, please see below.

I will let you know if they respond to me.

Ken Haynes, Jr.

(Editor's note: Ken was very kind to share this with our readers. This is a copy of the information he sent to the USFA. Frankly, we need more actions like this by industry pros from coast to coast. If every time a government agency, private firm or media misstated facts about manufactured or modular homes, an Industry pro would speak out, we would over time have fewer such errors and over time we would sell more homes too. Let us hereby thank Ken and encourage you and others to do the same.)

Thank you for submitting the following to USFA.

Comment for:

Dear USFA,

I just read your flyer titled, "Live Safely in Your Manufactured Home, A Fact sheet on Manufactured Home Safety."

You should be ashamed of yourselves publishing such drivel without explaining the differences between "mobile homes" constructed prior to the implementation of the Federal Manufactured Housing Construction and Safety Standards Act (HUD Code) developed and enforced by the Department of Housing and Urban Development (HUD), and "manufactured homes" constructed to the specifications of the HUD Code.

The information you have provided in the publication is inaccurate, misleading and slanderous. You have lumped together two completely different types of affordable housing. To make an analogy that you might understand, comparing it to the automotive industry, you are saying that the safety of a Ford Model A is in the same category as a 2011 Ford Fusion because they are both motor vehicles with four tires and a steering wheel.

The truth is that fire frequency and death rates of manufactured homes built to the HUD Code is comparable and even less than site built homes, yet your publication makes absolutely no reference to this fact.

You obviously have no idea of what you are talking about, grouping all factory built housing in the same category.

Are you purposely trying to kill the manufactured housing business with false claims put forth in publications such as this? It seems to me that you are.

In my opinion, this is just another effort to foster the notion that manufactured homes should be forced to have fire sprinklers, but that site built homes should not be forced to have fire sprinklers, thus promoting an unfair and costly expense to manufactured housing, diminishing their popularity and giving an unfair advantage to site-built home builders.

This form should be withdrawn and corrected immediately, a retraction issued, and an apology issued to the manufactured housing industry.

Sincerely,

Ken Haynes Jr

401 Shatto Dr

Carlisle, PA 17013

717-258-3799

An MH Industry Turn Around Plan, Part II

November 16th, 2011 No comments

An MH Industry Turn Around Plan, Part II

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

A stunning tip by and about a manufactured housing industry chattel lender

August 21st, 2011 No comments

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

 

Chattel Lender Lowers Rates to 4.5%: Best ever for home only Manufactured Housing Loans

August 12th, 2011 No comments

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

 

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

May 20th, 2011 2 comments

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

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

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

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

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

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

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

The industry needs to go forward, not backwards.

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

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

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

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

Into the Great Green North

January 25th, 2011 1 comment

A Conversation with Kathleen Maynard, CMHI

CMHI logoUnlike 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.”

President Obama’s Regulatory Executive Order Puts HUD Regulators on the Spot

January 20th, 2011 No comments

MHARR LogoAttached 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

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