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MHI PAC and the Upcoming Midterm Elections

October 26th, 2010 2 comments

Industry in Focus Reporter Eric MillerWASHINGTON, DC – Indiana representative Joe Donnelly is the top recipient of contributions from the Manufactured Housing Institute Political Action Committee (MHI PAC). According to OpenSecrets.org, Donnelly received a $6,000 contribution during the 2010 election cycle.

As of October 13, 2010, receipts totaled $101,019.00 with $79,590.00 cash on hand. Total spent amounts to $118,584.00. Sixty-five percent of contributions were made to Democrats and 32 percent went to Republicans, with specific Republicans receiving some of the largest contributions.

Donnelly and several key members of the Manufactured Housing Congressional Caucasus are facing tight races. The biggest recipients in House of Representatives races include Barney Frank (D-MA) with $3,000 and Bill Posey (R-FL) also with $3,000 and Baron Hill (D-IN) $2,000. In the Senate races, top recipients include Blanche Lincoln (D-AR) with $4,000 and Richard Shelby (R-AL) with $3,500.

House
Total to Democrats: $31,750
Total to Republicans: $15,500
Recipient Total
Aderholt, Robert B (R-AL) $1,000
Bachus, Spencer (R-AL) $1,000
Boswell, Leonard L (D-IA) $2,000
Boyd, Allen (D-FL) $2,000
Brown-Waite, Ginny (R-FL) $1,000
Calvert, Ken (R-CA) $1,000
Camp, Dave (R-MI) $2,000
Chandler, Ben (D-KY) $1,000
Childers, Travis W (D-MS) $2,000
Clyburn, James E (D-SC) $1,000
Davis, Geoff (R-KY) $2,000
Donnelly, Joe (D-IN) $6,000
Driehaus, Steve (D-OH) $2,000
Duncan, John J (Jimmy) Jr (R-TN) $2,000
Etheridge, Bob (D-NC) $1,000
Frank, Barney (D-MA) $3,000
Hill, Baron (D-IN) $2,000
Hoyer, Steny H (D-MD) $2,500
Matsui, Doris O (D-CA) $1,000
McHenry, Patrick (R-NC) $1,000
Miller, Brad (D-NC) $1,000
Olver, John W (D-MA) $1,000
Paulsen, Erik (R-MN) $250
Posey, Bill (R-FL) $3,000
Scott, David (D-GA) $2,000
Souder, Mark E (R-IN) $1,000
Tanner, John (D-TN) $1,000
Thompson, Bennie G (D-MS) $1,000
Tiberi, Patrick J (R-OH) $250
Tonko, Paul (D-NY) $250
Senate
Total to Democrats: $12,000
Total to Republicans: $6,500
Recipient Total
Baucus, Max (D-MT) $1,000
Corker, Bob (R-TN) $1,000
DeMint, James W (R-SC) $1,000
Dodd, Chris (D-CT) $1,000
Lincoln, Blanche (D-AR) $4,000
Murkowski, Lisa (I-AK) $2,000
Nelson, Bill (D-FL) $2,000
Pryor, Mark (D-AR) $1,000
Reed, Jack (D-RI) $1,000
Schumer, Charles E (D-NY) $2,000
Shelby, Richard C (R-AL) $3,500
Wicker, Roger (R-MS) $1,000

Based on data released by the FEC on October 25, 2010.

Feel free to distribute or cite this material, but please credit the Center for Responsive Politics. For permission to reprint for commercial uses, such as textbooks, contact the Center.

In terms of voting records on industry related issues and the S.A.F.E. Act, as well as Title 1 reform and Duty to Serve, were all contained in the Housing and Economic Recovery Act of 2008 (HERA). In the Senate, Reid, Shelby and Lincoln all voted for the Act. Then-Senator Obama did not vote. In the House, Donnelly, Hill and Frank all voted for the bill. Posey was serving in the Florida State Senate at the time. Would-be Speaker of the House John Boehner voted against HERA.

The National Association of Homebuilders (NAHB) and the National Association of Realtors (NAR) has also provided contributions to these candidates. As of October 13, Donnelly received $1,000 from the NAHB PAC. Frank received $5,000 from NAHB, as did Posey. Hill is not listed as having received a contribution from NAHB. In the Senate races, NAHB gave $2,500 to Lincoln and $5,000 to Shelby. In contrast to MHI PAC’s contributions, the NAHB gave 39 percent to Democrats and 60 percent to Republicans. The total spent by the Homebuilders in the 2010 cycle is $3,012,057.

MHI-PAC contributions chart
Chart created by MHMSM.com’s Industry in Focus Reporter Eric Miller from information available on opensecrets.org

Contributions by the National Association of Realtors far exceed that of either the NAHB or MHI. As of October 13, the Realtors gave 58 percent to Democrats and 41 percent to Republicans. Donnelly received $6,000 from the Realtors, Frank received $6,000, Hill received $6,000 and Posey was handed $5,000. In the Senate races, Lincoln received $14,000 and Shelby $3,000. Total expenditures for Realtors in the 2010 cycle are $11,218,449.00.

Democrats currently hold a 256-178 majority in the House of Representatives, with one vacancy. The battle for control of the House focuses primarily on 64 competitive races–58 Democratic-held seats and 6 Republican-held seats including 9 members of the Manufactured Housing Caucus.

According to MHI, two races that are particularly important to the manufactured housing industry are those including Congressman Baron Hill (D-IN) and Congressman Joe Donnelly (D-IN). Beyond financial contributions, MHI says it will be working with members in these key districts to get-out-the-vote for their candidates.

According to their report to members at their Denver meeting in September, MHI believes as do many political analysts that a Republican takeover of the House of Representatives is possible. If so, House Minority Leader John Boehner (R-OH) is in line to become Speaker of the House. A GOP majority would mean major changes as a number of senior Democrats chairing committees important to manufactured housing would face demotions to lesser roles including Housing Financial Services Chairman Barney Frank (D-MA), a staunch supporter of manufactured housing.

The current Senate line-up is 57 Democrats, 41 Republicans and 2 Independents. The Republicans must win 10 seats to recapture the Senate. The odds favor continued Democratic control, but a significant surge by Republican candidates could lift the Republicans into striking distance of gaining control of the Senate.

More information on the MHI PAC is available at http://www.manufacturedhousing.org ##

Some Say the Future for Manufactured Homes Is Downtown

October 24th, 2010 2 comments

Industry in Focus Reporter Eric MillerMark Dillard, Executive Director at the Manufactured Housing Institute of South Carolina (MHISC) uses a photo of a vacant lot near his office, just blocks from the state Capitol to demonstrate the potential to place manufactured homes on vacant lots throughout the state. In the state capital of Columbia, Dillard says there’s already a trend of bringing condos and retail downtown, and the addition of more moderately priced workforce housing in the form of manufactured homes makes sense.

Single-section HUD-Code Home, Oakland, California
Single-section HUD-Code Home, Oakland, California

Most manufactured homes produced today are destined for suburban and rural locations, and Dillard’s vision would defer to the exception rather than the rule.  Experts say an increasing amount of residential development in the coming years will be in urban areas and inner suburbs. Even within the suburbs, development will not be of the ranch-style-home-on-half-acre-lot most manufactured homes emulate, but of the new urban sort with sidewalks and a mix of retail office and residence. It’s a cost-effective thing for the utilities and municipalities, says Dillard. “What we’ve seen thus far is condos, but we’re talking about individual affordable homes. It seems like it fits the trend.”

Even so, this may present a problem as well as an opportunity for the manufactured housing industry.

An article in the Journal of the American Planning Association (JAPA) earlier this year argues that manufactured housing could solve the affordable homes crisis in urban areas, but only if planners help local people to overcome their prejudices.

Writing in the winter issue of JAPA, two leading urban affairs and planning experts—Professor Casey Dawkins and Professor Theodore Koebel from the Center of Housing Research at Virginia Tech—urge urban planning officers to support proposals for manufactured homes. The research was sponsored by HUD and has yet to be released in its entirety.

In the research, Dawkins and Koebel argue that the planning process discriminates against people with low incomes unless planners speak up for the design improvements, longevity, and value for money that make manufactured housing a feasible and affordable alternative to traditionally built homes.

Their new research shows that planners see high land prices and citizen opposition as the biggest barriers to manufactured housing developments in urban areas.

According to the journal article, government subsidies—including grant and loan programs supporting low-cost housing construction and rehabilitation, tax incentives and gap-financing programs for low income borrowers, tax credits for affordable housing production, and public and nonprofit ownership—have been the most common tools for increasing the supply of affordable housing in the United States. Alternatively, policy could focus on reducing market barriers to low-cost housing producers.

In South Carolina, Dillard says a major barrier is zoning restrictions.

“A lot of the municipalities in South Carolina banned manufactured housing 20 or 30 years ago,” Dillard explains. “We’re looking for opportunities to talk to them about affordable housing and the declining population a lot of municipalities have.”  It’s that window for conversation, opened by the sagging economy that may help bring changes to zoning laws to welcome manufactured housing.

The potential application for manufactured housing in this arena is significant. Absent subsidies, the researchers at Virginia Tech say manufactured housing costs less per unit than any other housing type because of economies of scale in production and because it uses standardized inputs and labor processes. In metropolitan areas with high land costs, manufactured housing offers potential for substantial cost savings by substituting other inputs for land.

Koebel told MHMSM.com that high land costs in urban areas make residential development with a low price point problematic. That has been helped with the use of modular housing, and it can also be addressed with manufactured housing, but builders are not likely to mix the two.

“Most builders are not going to do mixed-production types in a subdivision,” Koebel says.  “It’s a question of how are you going to do subdivisions that are going to pay for the cost of land. It’s hard to do it with any type of construction with a modest price point. If they’re going for a modest price point, they’re either going to go modular or manufactured, I don’t think they’re going to be mixing and matching.”

If the zoning laws can be amended to allow manufactured housing, Dillard says there are benefits for South Carolina’s cities and towns. The first is a reduction in suburban sprawl, which he says is a frequent goal in the state. The second is a savings on infrastructure costs. Another prong of their approach has been to contact power companies and explain the benefits of using manufactured housing for infill development. He points out that a power line with 10 houses on it is more efficient than one serving six. Municipalities can realize those same benefits with transportation and sewer and water infrastructure.

Previous Efforts at Infill and Brownfield Development

There have been efforts and successes over the years to bring manufactured housing to both brownfield and infill sites in urban areas. Most notable perhaps is Oakland, California.

“Oakland is certainly an example of using HUD code to promote infill,” Koebel says.

Structural innovations now allow modestly pitched roofs, as well as two-story stacking of units, although most manufactured housing units do not have these attributes. Those innovations have helped the East Bay city to demonstrate the utility and cost advantages of placing manufactured housing on infill lots in a built-out city.

Multi-section Single-family HUD-Code Home, Oakland, California
Multi-section Single-family HUD-Code Home, Oakland, California

There are other examples including several in the Pacific Northwest the researchers looked at. Also in 1997 the Manufactured Housing Institute (MHI) undertook a pilot project to bring manufactured homes to five major urban areas. Working in conjunction with architectural firm Susan Maxman & Partners, the project focused on Wilkinsburg, Pennsylvania; Washington, D.C.; Louisville, Kentucky; Birmingham, Alabama; and Milwaukee, Wisconsin. Later in a 2003 showcase example, the Mills of Carthage project in Cincinnati brought 15 manufactured and modular homes to a brownfield site there.

MHI says on its web site the initiatives were intended to address the outdated assumption that manufactured homes are not appropriate for placement in major urban and suburban areas. Also in the case of the 1997 initiative, the project was designed to highlight any impediments and challenges to using manufactured homes, and help pave the way for a more extensive use of manufactured housing in future efforts.

The North Carolina Manufactured Housing Institute (NCMHI) began another venture to demonstrate that manufactured homes can be architecturally compatible with existing homes in urban settings and also be a solution to the affordable housing crisis facing many of the state’s urban and inner suburban areas. 

3 BR, 2BA bungalow style home blends in with it's Raleigh, NC neighborhood.The result was an attractive three bedroom, two bath, 1500-square-foot home in the shadows of the North Carolina statehouse in downtown Raleigh. Designed complete with a factory-constructed front porch, the house blends in with the 1920s bungalow-style architecture of the neighborhood in the southwestern part of the city. It was also priced some $80,000 less than comparable homes in the neighborhood.

Yet despite its affordability and quality, manufactured housing continues to face opposition and legal barriers. In Raleigh the new home was allowed under an exception to a Raleigh city ordinance, which currently prohibits manufactured housing within the city.

Those issues are not confined to North Carolina. As the Virginia Tech researchers point out, perhaps the most significant barrier to siting new manufactured homes in metropolitan areas is the presence of zoning codes that restrict the size, design, location and even existence of manufactured units. 

Overcoming Barriers

According to the research, several factors motivate local governments to adopt these and other manufactured housing regulatory barriers, including general prejudice against all forms of low-cost housing and the low aesthetic appeal of the traditional but outdated “trailer park” community design. Citing a variety of research, the authors conclude that planners are also influenced by erroneous perceptions that manufactured home residents constitute a transient population, that manufactured housing is substandard and unsafe, and that manufactured housing appreciates more slowly than traditional site-built homes and negatively influences adjacent housing prices.

However, as the authors point out, evidence suggests that nearly all of these claims are either illegitimate or unwarranted. Despite this evidence, negative stereotypes of manufactured housing persist, making it likely that local government officials will continue to impose regulatory restrictions on such housing.

A 1996 survey of 1,172 communities conducted by the American Planning Association, found that while almost all communities permit manufactured homes in some residential districts, on individual lots, considerably fewer allow them in all or in the most restrictive residential districts. Only 29 percent of responding communities had regulations that treated site-built homes and manufactured homes comparably.

“Our research shows that having a HUD code subdivision increases the number of homes going into an area,” Koebel says. “Having more land already zoned—small lot development at modest price points—and having areas of that sort identified and pre-zoned helps increase the number of units.”

x
Tri-section HUD-Code Home Located in the Hills, Oakland, California

The authors received responses from 940 communities regarding the perceived barriers to placing manufactured housing. The survey respondents were asked to rate a list of potential barriers to HUD-code homes. The potential barriers with the largest share of respondents saying they were significant or would prevent placements were: the high cost of land (42.4 percent), citizen opposition (36.1 percent), no new parks (35.6 percent), zoning codes (33.4 percent), not much land (31.1 percent), deed restrictions (26.8 percent), and historic district regulations (26.1 percent). Fees, permits, wind codes, snow load standards, fire codes, and environmental regulations were the most likely items to be identified as “not a barrier” or a “minor barrier.”

The authors also found that by-right zoning, when manufactured housing is treated equally in single-family housing districts, has a positive impact on unit placement that is greatest when explaining whether a community has any manufactured housing placements at all as opposed to none. The effect of by-right zoning on the odds of placing one unit or more is three times higher than it is on the odds of placing more than 20 units. Above 50 units, the impact of by-right allowances diminishes in magnitude even further, although it is still statistically significant.

To some in the industry the idea that local zoning can impact the placement of manufactured homes in urban areas, or anywhere, runs counter to the intent of the Manufactured Housing Act of 2000 that says the HUD code should be broadly and liberally interpreted. Local zoning or aesthetic requirements, as well as building requirements, cannot be placed on homes built to the HUD code.

But Koebel says most manufactured housing placement has come by way of state preemption that allows manufactured homes in single-family neighborhoods. 

“I think HUD and the federal government would be highly reluctant to get into the details of preemption in terms of land-use regulations,” Koebel comments. “That’s just such a heavily state-oriented function. Some states require that you allow manufactured homes in single-family zones as a by-right use. You usually have that with some design standards. I personally don’t think the federal government is going to take on state and local governments on that.”

HUD Program Manager Edwin Stromberg told MHMSM.com the research was part of a wider effort to gain insight into barriers to affordable housing and that the report should be released within the next few months.

How Big is the Potential Market?

According to a 2009 study by RCLCO, both retiring baby boomers and maturing echo boomers are looking to move away from the suburbs. Both groups reported wanting to live in more urban, mixed use, mixed age areas that offer services, community and walk-ability. A study released in 2009 by the U.S. Environmental Protection Agency titled “Residential Construction Trends in America’s Metropolitan Regions” shows that there has been a striking move back to the urban core in many markets. While Generation X is small, experts say the larger Generation Y will be looking for urban amenities, but may not be able to afford living downtown. 

Manufactured Housing Institute Executive Vice President Thayer Long says Generation Y, the next generation of homebuyers, is a group bigger than the baby boomers and just coming of house purchasing age. The group is more environmentally aware and as far as preferring urban areas, Long says there may be more opportunities for the manufactured housing industry to get involved.

Most manufactured homes produced today, and at any time in the past, however, are destined for rural and suburban areas. For the past half-century the bulk of new residential development has occurred in greenfields, which is land that hasn’t been previously built on. Researchers now say the amount of new development occurring in brownfields and urban infill is on the rise. Manufactured home producers may wonder what the risk is of not meeting the needs of the urban market or homebuyers who prefer walkable urban districts.

“If we reached the point of having 25 percent infill/brownfield, that would be achieving a great deal,” Koebel says. “There’s some evidence that infill and redevelopment has increased market share.”

Koebel says modular products are well suited to infill development and that there are systemic barriers to significant placement of manufactured housing in high-priced urban areas.

“The industry got itself into a market segment that’s targeted to a rural, lower-end product and has never figured out how to take advantage of other market segments,” Koebel says. “Partly it’s the retail structure. The industry has serious problems with path-dependency. It got itself into a rut in terms of how you use the product and who is the market for the product, all the way down to how it gets advertised and sold; all of that becomes reinforcing and limits its use in urban areas.”

Conclusions

The researchers conclude planners can promote affordable housing by projecting the potential demand for manufactured housing in a number of ways including devising educational programs to promote community acceptance, reviewing and modifying existing regulations so they treat manufactured housing the same as site-built single-family housing and by designing incentives to promote affordable redevelopment using manufactured housing on vacant infill lots.

Dawkins and Koebel want planners to educate their local communities away from thinking that manufactured housing means “mobile” homes, “trailer parks,” and anti-social behavior. 

For Dillard, the solution is about education, but also about promotion. Part of his vision is to have major producers set up a cul-de-sac showcase of manufactured homes where they can be on display and later purchased.

But that’s down the road. For now, with the photo of a vacant lot in hand, he’s working to win over municipalities one at a time.

Notes:

HUD photos: Thanks to Steve Hullibarger

(Raleigh Photo: http://www.manufacturedhousing.org/developer_resources/urban_design_raleigh.asp

IMHA-RVIC News regarding the status of the Louisville Show

October 9th, 2010 9 comments

IMHA-RVIC logo

Please see the message below from the Midwest Manufactured Housing Federation regarding the status of the Louisville Show. We encourage all IMHA members to support this event.


As a part of the manufactured housing industry, you know how tough business conditions have been for the last several years. These same business conditions have taken a toll on the Louisville Manufactured Housing Show, reducing the number of show homes in 2009 and forcing its cancellation in 2010. As caretakers of this industry event, we’re doing everything possible to make sure it happens successfully in 2011 but we need your support to renew this tradition.

Maybe you’re a manufacturer who can take one home to the show. Maybe you’re already taking two homes but can take one more. Maybe you’re a supplier who has not yet committed to the show. Please call Dennis Hill at 770-587-3350 and make that commitment today! Maybe you’re a retailer or community owner who can call your manufacturers and tell them you hope to see their products at the show. Let your suppliers know you’ll be in Louisville in January. Maybe you can even make arrangements to purchase one of the show homes.

We’ve cut expenses by eliminating set management fees and reimbursements to the Midwest Federation members and have revamped the advertising campaign. With 7 manufacturers, 20 floors and 45 booths already committed we’re just 6 floors away from being able to finalize our contracts to make the 2011 show a reality.

We are quickly running out of time to get these final commitments. Everyone has a part in making this event happen, and with the support of the industry it will happen. Please do your part to support the Louisville show and plan on being there in January.


3210 Rand Rd., Indianapolis, IN 46241 • 317-247-6258 • Fax: 317-243-9174

Manufactured Housing Must Become Mainstream Housing

October 3rd, 2010 2 comments

by Thayer Long

MHI logoThe National Manufactured Housing Construction and Safety Standards Act of 1974 and subsequent changes found in the Manufactured Housing Improvement Act of 2000 laid the foundation to bring manufactured housing into the mainstream housing market. Over 35 years has passed, and great strides have been made in fulfilling this destiny. Over the past two decades we have represented over 20% of all new single family homes built in this country. This is a significant achievement, even given the fact that the last decade has seen some dismal numbers for this industry. But even the biggest industry supporters agree that the manufactured housing industry has yet to realize its tremendous potential. When will manufactured housing be considered mainstream housing?

That day will come when the industry fully embraces the concept that we belong in the mainstream housing arena.

America needs manufactured housing to be mainstream housing. We build high quality homes at a price most can afford. This concept is nothing new. I think we all see the benefit of having manufactured housing considered as an equal in the housing world. But the effort to get there has been the real challenge. We need to think outside of our traditional core set of issues. We need to acknowledge that the mainstream housing world is bigger than anything our regulators at HUD throw at us. We need to throw out some of the rules we used to play by and adopt some new ones.

First we need to start thinking of ourselves as mainstream housing. In the past, we have traditionally thought of ourselves as a niche in the overall housing market. If an issue didn’t specifically mention manufactured housing or there wasn’t a direct connection to our business, we chose to ignore it. Frankly, this way of thinking worked in the past. But those days are quickly coming to an end. The housing market is evolving, the consumer is changing. If we want to expand our presence and increase our business, and above all if we want the parity in the housing market we all desperately seek – we need to think broader in scope. If we want to be taken seriously, then we need to be prepared to think mainstream.

I know there are some that like the niche that we operate in and think the market and conditions need to change to us, instead of us to them. Some are afraid of what being part of the mainstream will mean, that we will lose our identity as affordable housing. As long as we can provide value to our customer, the demand for our homes will be there. But if we cut ourselves off from the rest of the housing market, we will be marginalized.

Indeed, in many ways we are being pushed into the “mainstream” market whether we like it or not. MHI, for instance, has over two dozen issues that we consider priorities for the industry because of the way they will impact your business. Only a handful of them could be considered “manufactured housing only” issues. In reality, we are touched by a large set of regulations, including things like the SAFE Act, Truth in Lending, and Fair Housing laws. This has caused angst for many, yet these laws, and many others, are found in the rest of the housing world. Please don’t misread; I’m not calling for additional regulation by any means. But I am pointing out that if we want a “level playing field,” if we want the same access to capital that the site-built world has, if we want to be treated fairly, it will require us to understand a different set of rules and adhere to laws and regulations that we are unfamiliar with.

Second, we need to act like mainstream housing. MHI’s Three Point Plan to industry success includes 1) improving financing, 2) aggressively updating the HUD-Code, and 3) protecting preemption. All three points are geared to both moving the industry ahead in the mainstream and ensuring that our homes remain affordable to those who need it.

In the area of financing, all lender practices in the housing world are under increased scrutiny by the government and investors for safety, soundness and transparency to consumers. We need to be part of this debate, to show that we are willing to, or in some cases already have, put in place the same principles other market participants share. Without it, our ability to access capital on the same terms as the rest of the housing market will be limited. Second, by promoting updates to the HUD-code on a regular basis, we ensure our homes are designed and built using new, efficient and innovative construction techniques, and are built using codes and standards that are relevant in today’s building environment. We cannot build to codes adopted years ago and still expect equal status from the rest of the housing world. Third, by following points one and two, we will protect the preemptive status of manufactured housing, the most potent advantage our industry enjoys and which is the single largest contributing factor to our affordability. Thus, by thinking and behaving mainstream, we will ensure our viability for years to come.

The path to success and prosperity will be found when manufactured housing is no longer considered a stigma. What is required to make that leap can appear very frightening, which is why as an industry we have spent so much time using the same arguments and expecting different results. No amount of arm twisting from HUD or legal wrangling will change that perception. That change will happen only when, as an industry in a unified voice, we make the conscious effort to move manufactured housing into the mainstream housing arena. ##

Thayer Long is Executive Vice President of MHI, the preeminent national trade association for manufactured and modular housing industries, representing all segments of the industries before Congress and the Federal government. From its Washington, D.C. area headquarters, MHI actively works to promote fair laws and regulation for all MHI members and the industry. He can be contacted directly at (703) 558-0678. For more information on MHI, visit www.manufacturedhousing.org

Spreading the Good News

September 29th, 2010 No comments

Chrissy Jackson photoAre you doing your share to spread the good news? Are you helping spread positive words about manufactured housing? About the diverse placement opportunities (communities, subdivisions, co-ops, private property, residential lots)? About the improvements in appearance and quality (drywall, vinyl lap siding, shingled roof, skylights, innovative kitchen designs and floor plans)? About the customer-friendly finance programs (lower down payments, twice-a-month payments, no pre-payment penalty loans)? About the other quality people who own manufactured homes by choice (professionals, white collar office workers, retirees, single parents)?

Are you taking advantage of every opportunity to improve the image of the manufactured housing industry? Does professionalism show in your dress? In your language? In your way of doing business? In your personal and business ethics? In the way you treat your customers? In the way you treat your employees? In the number of referrals previous customers bring you?

Opportunities abound for each of us to shine in this area. No one person can possibly do it alone. It takes all of us, all of the time, working together to improve the image of manufactured housing, to increase sales – which in turn will increase production – and to continue to make inroads in the areas where zoning and image issues thwart our growth.

Look for speaking opportunities if you are a good public speaker. Take advantage of “Career Day” at your local high school. Talk at a Rotary Club meeting or other business gathering where a speaker is needed. The Chamber of Commerce usually holds a “Business After Hours” in most areas of the United States. Volunteer to host one. Invite public officials and chamber members to see our product, view the lifestyle your community offers and learn about manufactured housing.

Display your community name, logo and phone number proudly on vehicles, uniforms, caps and literature. Employ people who have enthusiasm for our product and are outgoing in dealing with the public. Keep your office and community sparkling – just as if it were an “Open House” every day – and, indeed, it is!

Advertise more than just a low price, low monthly payment or free rent to convince potential homeowners to visit your location. Advertise the beauty and efficiency of the homes you sell, the quality of the lifestyle your community offers, the professionalism of your staff. Spread the good news with well-written flyers, brochures and literature.

Attend zoning meetings, planning meetings; join the Chamber of Commerce; run for a local office; turn your clubhouse into a voting precinct; become a volunteer for Meals on Wheels or the Fire Department. Get involved in the surrounding area and make a difference. Just by being yourself, by making new friends and broadening your horizons, and by constantly being professional, you will be spreading the good news.

The good news is that we are more than just affordable – we are desirable! We are more than just “somewhere” to live – we are a lifestyle of choice! We are more than low investments and low monthly payments – we are efficiency, durability and quality! We are more than just “landlords” – we are real estate investment managers of multi-million dollar properties. We are more than just sales people, managers, activity directors and maintenance crew – we are the people who provide the backbone for the industry that has proven housing solutions, and also has the confidence of the buying public who live in our homes! We are more than just occupants for used-up agricultural land at the edges of town – we are a compatible housing product that fits into any environment through our superior design and engineering capabilities!

We are MANUFACTURED HOUSING – and we are proud of it! Spread the good news – it’s a challenge – from me to you! ##

Chrissy Jackson
President, Chrissy Jackson & Associates, Inc. www.chrissy-jackson.com
President, Florida Writers Association, Inc. www.floridawriters.net
Vice President, Florida Writers Foundation, Inc.
P. O. Box 66069
St. Pete Beach, FL 33736-6069

Editor’s Note: Be sure to check out Chrissy Jackson’s series of Feature Articles:

Study Suggests Cities and Towns Should Accept New Manufactured Housing Communities

September 1st, 2010 No comments

William P. McCarty is Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago. His recent study took a look at crime in mobile and manufactured home communities. The findings: there is no significant difference between the rates of crime in manufactured home communities relative to other residential areas. The study concluded that cities and other municipalities should not be so reticent to allow the creation or expansion of manufactured home communities, and indeed suggests that communities have a vested interest in providing housing options for its citizens. The evidence in the study suggests that local regulators should seek to make sure that the permitting system is disposed towards allowing greater placement of manufactured home communities.

In an exclusive interview with MHMSM.com Reporter Eric Miller, McCarty offers some additional insights into crime and mobile home communities.

(Editor’s Note: Prof. McCarty uses the phrase “mobile home park” generically, although the Industry uses this phrase to differentiate homes built before the HUD Code of June 15, 1975, from “manufactured home community,” those built after that date.)

1. Why did you decide to take a look at crime in manufactured home communities?

I have always been interested in how the presence of certain types of businesses or other developments can affect crime. This type of approach has been taken through examinations of public housing structures, bars, and schools, for example, but it had never been done with mobile home communities. I became interested in mobile home communities due to the persistent stigma against this type of neighborhood. Even though the perception existed that these places were bad, I could not find a study that actually used solid data and methodology to test those negative assertions. Mobile home communities are also interesting from a criminological theory standpoint because they have historically been characterized by a lower-income and mobile population, two factors that often result in more crime. Conversely, they have historically been characterized by a homogeneous group of residents, which is a factor that often results in less crime. Factor in all of these interesting issues and I was excited to test the amount of crime in mobile home communities.

2. Can you tell me about the homes and communities you looked at?

There is a fairly diverse spectrum of mobile home communities in Omaha, NE. In total, there were 15 communities that covered 32 street blocks in the year 2000, which was when the data were collected. Some of those communities have many rental units, while those at the other end of the spectrum follow the estate model with owned units and land. In other words, they range from fairly dilapidated and poor conditions to very aesthetically pleasing and moderately affluent conditions. Nowadays, a couple of those communities have been torn down or abandoned.

3. Do you know anyone who lives in a manufactured home?

I do. I actually conducted interviews with a small sample of mobile home residents (approximately 20) in 2008. I have another manuscript currently under review that discusses the results from those interviews.

4. You mention that manufactured homes are often placed in blighted areas. Perhaps then it is remarkable the crime rate is on par with other communities.

There are two ways (if not others) to interpret this finding. On one hand, some theorists would agree with your conclusion, given the poor conditions where these communities are often placed. The broken windows perspective, for example, would posit that these dilapidated surroundings would be related to higher rates of crime. Other theorists may still find these rates higher than expected, due to the fact that there is a smaller concentration of people, businesses, traffic, etc., in these areas. In other words, one could argue that there are not a lot of readily available or apparent opportunities for crime in mobile home communities, when, for example, compared to a downtown block with bars, people walking around, businesses etc.

5. Do you think Omaha is a good representation of manufactured home communities elsewhere?

This is a very good question. The City of Omaha has demographics (e.g., income, racial composition) that closely mirror those of the United States. So, Omaha is often viewed as a good representation of the entire country in terms of its demographics. In terms of its mobile home communities, I would not be so certain that it is an excellent representation. My reasoning is that roughly 75% of mobile home communities are in rural areas (and you may have a better estimate of this than I do). The communities that I studied were of course located within the city. One aspect of this study I feel pretty confident about is that the mobile home communities in Omaha were diverse, from the more dilapidated looking parks all the way to the affluent ones and other parks in between. In other words, the average crime frequencies, etc., are somewhere between the extremes, which is what you want.

6. From my experience, manufactured home communities are more dense than many suburbs, often have porches or decks facing the street and so tend to be more neighborly and social. Does that design/architecture impact crime? Could there a kind of Jane Jacobs “eyes on the street” affect at work even here?

Good question. In Omaha, the design of the communities varied. Some of the communities had the decks and other outdoor space that you describe. Other communities did not have such amenities. Generally speaking, guardianship (in the Jacobs mold as you describe) can result in less crime. The variable, however, is how well the residents know one another. If residents know one another, those decks are great. John Doe is sitting on his deck and sees someone who is foraging around an adjacent unit. If he knows his neighbor well, he may realize that person does not belong. His suspicions would be aroused and he may call the police, alert the manager, or say something himself. Conversely, if John does not know his neighbors, he may be clueless about whether that person is up to trouble or is a relative of that person living there. Simply put, manufactured housing communities with a constantly changing population make it more difficult for effective informal social control (or guardianship) to take place. On the other hand, manufactured housing communities that are more stable allow residents to know and recognize one another, which make it easier for them to detect if something is amiss or suspicious.

7. In your opinion, does owning land have impact on the crime rate? On social mobility?

Without a doubt. Numerous studies in criminology have illustrated the importance of home and land ownership for helping decrease the rate of crime. People have a greater stake in their communities when they own something. If the community begins to erode or crime begins to increase, those residents are affected not only in the quality of their lives, but also their home and land value. This study illustrated the same thing in terms of mobile home communities. As the percentage of home ownership increased, the average rate of crime decreased. This finding held for all types of blocks.

In terms of social mobility, the result is the same. Owning an asset helps people move up the social ladder, if they desire. A smaller manufactured home can be sold to pay for a larger one. A manufactured home can be sold to have enough money for a down payment on a site built house, if someone desires. While this study did not test or explore social mobility, this logic has held in numerous other studies.

8. Did you look at any age-restricted communities? If so, what did you find? If not, what would you expect to find?

To the best of my knowledge, none of the communities studied were age restricted in 2000. Given prior research, elderly residents are, of course, less likely to participate or be victimized by crime. As a result, I would expect older communities to have less crime.

9. Does the density of a manufactured home community have any impact on safety?

I am unsure what you mean by safety. Population density is another variable that significantly affects crime. The issue of density seemed to be important in my study as well. When you compare the average raw frequencies of crime in mobile home communities to other types of neighborhoods, mobile home communities come out higher. In other words, mobile home communities, on average, had more crimes reported to police than other types of blocks. When you calculate a RATE of crime (frequency of crime divided by population), however, these differences go away. This suggests that mobile home communities experience higher frequencies of crime because they have more people concentrated in an area.

10. Did you discover anything that may not be related to the research, that you found interesting?

As I mentioned, I have another article under review that discusses the results of the interviews with residents, owners, and managers of mobile home communities in Omaha. One of the key themes seemed to be on-site management. This made a tremendous amount of difference in the quality of life in a mobile home community. I interviewed people from 6 of the 15 communities and I was amazed by how much the parks varied. On the low end, you had problems with fear of crime, gangs, etc. On the high end, you had residents who adored each other, helped each other out, and communicated well with the management structure. Another issue that I found interesting was that some communities have a growing number of minority residents, which has created some problems.

I enjoy studying life and crime in mobile home communities. I have a few additional studies planned. I want to stress that I have no agenda. I really enjoyed working with and talking to residents, owners, and managers. All types of communities have problems and issues and I want my research to help inform people and policy makers about how to make life better in these developments. The reason why I enjoy studying mobile homes is because I am fascinated by that whole “trailer trash” stereotype. I dislike when stereotypes are considered fact. I am a researcher. I like to test various ideas by using actual data and sound methodology.

William P. McCarty is an Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago is an Assistant Professor in the Department of Criminology, Law and Justice at the University of Illinois-Chicago. He received his Ph.D. in criminal justice from the University of Nebraska at Omaha in 2008. His research interests include neighborhoods and crime, correctional staff and management, policing, and quantitative research methods.

by Industry in Focus Reporter Eric Miller for MHMSM.com Industry Voices

“Frequently Asked Questions” on HUD Website

August 23rd, 2010 No comments

MHARR logoIn response to numerous inquiries that MHARR has received in recent weeks, industry members should be aware that the HUD manufactured housing program has recently modified the “Frequently Asked Questions” (FAQ) section of its internet website. The FAQ questions and answers now correspond with, repeat and mirror HUD assertions contained in a June 22, 2010 letter to Congress (download copy), which purport to justify and rationalize its failure, over the course of ten years, to fully and properly implement key reform aspects of the Manufactured Housing Improvement Act of 2000.

In the wake of HUD’s June 22, 2010 letter to Congress, which set out a number of new, revised and altered arguments for continuing efforts by program regulators and attorneys to avoid and neutralize the reforms of the 2000 law, Congress requested MHARR to submit a point-by-point response, which the Association did on July 22, 2010 (copy also attached). This response not only refutes HUD’s core arguments on each issue addressed, but also highlights factual errors and incorrect assumptions underlying various HUD positions – such as those pertaining to the crucial role and authority of the Manufactured Housing Consensus Committee (MHCC) – which HUD has systematically downgraded and undermined in recent years.

Because HUD’s June 22, 2010 letter had been directed to Congress, in response to a specific congressional inquiry regarding the implementation of key aspects of the 2000 reform law, MHARR had similarly directed its point-by-point industry response and refutation specifically to Congress. Now, though, that HUD is extensively publicizing the assertions contained in its June 22, 2010 letter – casting those assertions as the supposed final word on the 2000 reform law implementation issues that they address, with no indication that those assertions have been disputed and refuted – industry members and all those with an interest in affordable manufactured housing should be aware that: (1) those assertions and contentions are strongly disputed; (2) that there is an industry response and counter to each of HUD’s assertions; and (3) that HUD Code manufacturers will continue – and will intensify – their efforts to ensure that all such reforms are, in fact, fully and properly implemented, in order to complete the transition of the industry’s homes to legitimate and affordable housing for millions of American families, sharing full parity with all other types of housing.

Therefore, to balance the public record on this matter and to correct any misperceptions that may arise from HUD’s non-acknowledgement of a contrary industry position on each of the issues now addressed in the FAQs, MHARR feels obligated to provide you with a copy of both HUD’s June 22, 2010 letter and the July 22, 2010 industry response to Congress. Please feel free to share the two attached documents with anyone who refers to or raises questions regarding the content of the HUD program website FAQs.

Thank you.

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

Timely Grassroots Engagement with Congress

August 17th, 2010 No comments

MHARR logoWith Congress in recess and with members back in their districts for the balance of the Summer, now is the best time of the year for industry members to seek out, communicate with – and meet – their federal representatives away from the distractions of Washington, D.C. While MHARR is in regular contact with Congress in Washington, D.C. in order to address and advance issues of importance to both the HUD Code industry and consumers of affordable housing, members of Congress are always anxious to hear directly from their constituents on matters that concern them. This is particularly true leading up to the November 2010 mid-term elections, with the control of Congress hanging in the balance.

As a result, grassroots industry members have an outstanding opportunity over the next few weeks to tell their members of Congress directly about the major challenges that the industry faces in Washington, D.C. in key areas, including private and public financing (i.e., the “Duty to Serve” and FHA Title I), and continuing issues affecting the HUD Title VI program, including the deteriorating status and stature of the Manufactured Housing Consensus Committee (MHCC) and the avoidance of – and non-compliance with – required consensus and rulemaking procedures by program regulators on major regulatory issues, such as the ongoing de facto expansion of in-plant regulation.

The common thread running through all of these issues (and many others), that needs to be constantly reinforced with Congress, is that the difficulties the industry faces in Washington, D.C. do not arise from the lack of good laws. To the contrary, Congress has provided the industry with highly beneficial legislation over the past decade, including the Manufactured Housing Improvement Act of 2000, and the “Duty to Serve” and FHA improvement provisions of the Housing and Economic Recovery Act of 2008. Instead, much of the difficulty faced by the industry is a consequence of the failure of relevant federal agencies to fully and properly implement these laws in a manner consistent with the intent of Congress. In large part, this occurs because of the comfort level that regulators routinely get from forces within the industry, or outside the industry, or both.

As many in the industry are rapidly recognizing, given the nature of the problem, the solution does not lie in passing more laws that will similarly be ignored or manipulated. Instead – and as MHARR has already begun to explore – ongoing industry engagement with Congress needs to be expanded to include effective congressional oversight of these matters to ensure that the good laws already on the books are respected and properly implemented by federal regulators. With the industry continuing to decline and with regulators’ continuing resistance to the full and proper implementation of these existing laws – which needlessly exclude consumers from the manufactured housing market – Congress needs to be fully engaged in an oversight capacity. And, the best time to embark on such an approach is right now, with one-on-one meetings of industry members with their congressional representatives, at home, in their districts, to be aggressively followed-up in Washington, D.C. by the industry’s national representatives.

Danny D. Ghorbani
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

An MHMSM.com INdustry In Focus Exclusive Interview Report With industry consultant and once interim-president of MHI, DICK ERNST Part Three

August 10th, 2010 No comments

Dick Ernst discusses the SAFE Act and its impact on the Manufactured Housing Industry, and the extent of a potential boost from FHA financing

Reporter Eric Miller with Publisher L.A. ‘Tony’ Kovach for MHMSM.com

We conclude the interview begun last week with Dick Ernst.

MHMSM: You just mentioned the SAFE Act. How is that being viewed from inside the mortgage industry?

ERNST: There is lots of confusion. More so, probably, for the manufactured housing business. In the mortgage business, it’s pretty straight forward. I think for the most part, mortgage brokers are being squeezed out because you can’t do the yield spread premiums, charge higher rates to customers with more money going to the broker and things like that. So I think the mortgage brokers are being really squeezed on the mortgage side of the business. But it’s pretty straight forward for the mortgage business. If you operate under a national charter – if you’re a national bank, credit union or thrift – you have to register your people; your people don’t have to be licensed. But the people who go out there and originate loans for you have to be licensed within the state they are doing business with, so you’re dealing with someone who is going to be regulated.

In the manufactured housing business though, it’s much more confusing because of the nature of our business – with some of it being mortgage-type transactions and a large part of it being chattel financing. There are some issues related to the SAFE Act that really make it confusing, in my view, for the average retailer. But in that situation, I believe, the way our business has historically been handled using a retail installment contract or a three-party contract, I think that’s going to be very problematic for the industry going forward because that, technically, makes the dealer a lender and then he assigns that loan to another lender, usually at par value. So, I think that’s going to be problematic and I think our industry is still trying to figure out the right way to handle it.

Community operators, those that we just talked about, that are actually investing in their own paper – I don’t think there’s any question that they are lenders. They are deriving benefit because they are collecting interest on the loan they are providing to the customer. All the other issues related to the administrative aspects of what a retailer does, those to me become more secondary to the bigger issues of, are you getting benefit by earning interest on the loans you are making? Are you, in fact, utilizing a retail installment contract, which represents a loan contract that you are taking to the borrower and then assigning it to someone else? I think all those things are more important issues.

MHMSM: Is becoming licensed difficult? Would that possibly serve the customer better if some of the people in the industry did become licensed?

ERNST: Becoming licensed for people who are involved in the mortgage business is like becoming licensed to begin with, passing your mortgage broker’s license. You have to have certain training and understanding of the mortgage lending laws and what you can do and what you can’t do, and what truth in lending is, or [Real Estate Settlement Procedures Act] RESPA is; the various applicable federal laws and state laws and things of that nature. So you already have a background in it and familiarity with it and you have studied for it to pass your mortgage broker’s license. It’s more difficult for our industry, because typical retailers are not that heavily immersed in mortgage lending and, from what I am told, many of them do have difficulty in passing that license, or passing that test to obtain a license because they are dealing with something they haven’t done before. So I think for our industry, it’s going to continue to be problematic. But if you step back about eight or ten paces from this thing and take a big-view picture of that and say, “Is the customer going to be better-served by having someone who is licensed handling or involved in their loan transaction?” I think the answer is, yes. The real question is: what does mortgage lending have to do with doing a chattel transaction?

TK: Let me jump in here and follow up on the SAFE Act issue because a lot of what we heard at the DC meetings was the shear costs of meeting the SAFE Act requirements. I remember the Texas Association executive director saying that a quick numbers crunch with some of their people came up with a cost of 12 million dollars for licensing, and some small lenders figure it’s going to cost them two million dollars to meet all the requirements. You want to touch on that for a second, how that impacts the industry?

ERNST: From a lender’s perspective, doing business in this industry: Take a company that does business in multiple states. They have to actually have people licensed – anyone who touches that loan transaction, helps to either set payments or underwrite or establish terms on that loan – is going to have to be licensed within that state. Because every state now has their own SAFE Act they were required to put together. So if you have someone operating in multiple states – and let’s say you have loan officers who may get loan business from five, six, seven, eight, nine different states – they’ve got to pass the licensing for all of those. And so the compliance – and I heard one of the major lenders in our industry talk about their expenses like you say – that compliance, that licensing – that’s looking at every aspect of your business to make sure you are doing things properly, because compliance is their second largest expense after personnel. It becomes very costly, because the penalties for violating SAFE Act requirements or regulations can be severe. I think the big fear that most of the industry has is that because of the economic situation, you may have states that see this SAFE Act as a potential revenue generator for them both through the licensing fees as well as the audit fees, and potentially the fines and penalties that might be imposed and collected.

MHMSM: But most state laws are based on the national model, right?

ERNST: They are, but keep in mind, the national model – there’s no final rule that’s been published yet. It’s questionable whether a final rule will be published because the responsibility for the SAFE Act is being transferred from HUD over to the Consumer Protection Bureau, and whether HUD is going to ever issue a final rule or not is in question. Meanwhile, you’ve got states out there that have created their own, based on the information provided initially from the proposed rule from HUD; and keep in mind, those were minimum standards. So the state law had to at least contain the minimum standards provided for in the national SAFE Act that HUD had published. So you see other states that have imposed other things such as brick and mortar requirements. In other words, you have to have a physical office with someone specifically licensed in that facility where records can be stored, where customers can come in if they wanted to, to address issues, whatever it may be. That becomes a very expensive proposition. And then you begin to look at states and say, “Well, how much business am I getting out of there anyway and can I justify having an office there; and if I can’t, then I am going to pull out of the state?” So you’ve got all of those issues. And when you talked earlier about the cost for some, it’s, “What do I have to do to be in compliance in those 46 or 48 states or whatever it may be that I am operating in?”

MHMSM: Right. I could see where that would add to the cost substantially. You once served as interim President for the MHI – when was that?

ERNST: Back in 1998, the last of the big years when we had 373,000 shipments that year. The issues the industry faced then were significantly different. MHI had been trying for a number of years to pass the Manufactured Housing Reform Act, if you will, that addressed issues like installation and licensing and inspections and things of that nature, that really brought some significant issues and updated the HUD code, so to speak. The industry battled and we had conflicting views with MHARR and we couldn’t get anything done. In fact, we had Congress people tell us, “You guys better get your act together before you come back in here because we can’t have divisive opinions from both of you. We don’t know which way to go on this thing, so you better get your act together if you expect to get any help on this at all.”

That was what I would say was one of the positive things that occurred during that period I did serve as interim president. Walt Young was the chairman at that time and Walt directed me to sit down with Danny Ghorbani and meet with him and see if some of our disagreement wasn’t more personality than substantive and if we couldn’t both come together and compromise. We did end up coming together. We formed a coalition with MHARR and had a working group of people that worked in lock step, and we spoke with one voice as an industry for the first time in many years. That helped to get the Manufactured Housing Act of 2000 passed.

The question that’s often asked is: How did we face that issue? And I mentioned earlier that we had a third of our business that had below a 600 FICO score. And everyone likes to have an excuse; and excuse or not, there was an awful lot of Wall Street money, there were a lot of things going on at that time in the industry, a lot of consolidations, a lot of acquisitions going on. Champion Homes was very busy acquiring other companies, acquiring a lot of retail distribution networks – chains, if you will, of retail operations – and creating a really intensive, competitive struggle within the industry. You had other companies then trying to stay ahead of the game with Champion and trying to match them purchase for purchase; a lot of Wall Street money chasing the industry saying these securitizations are great, get us more, get us more, and people saw the acquisition of a chain of retail operations as a way to cement their ability to generate a lot of retail paper and more securitizations. As a result, underwriting went away pretty much. I remember lenders were paying as much as five points for a transaction to a retailer – and that’s to buy a 600 FICO score customer – and they were paying the retailer five points. That’s just not sustainable. It all came crashing down. Repossessions started occurring with great frequency and it became very difficult.

MHMSM: It seems to me manufactured housing can now be positioned as quality housing you can afford, unlike the so called site-built McMansions that too many couldn’t afford; but there’s talk the Obama administration may begin to look away from promoting and subsidizing homeownership in favor of pushing the rental housing market. Shouldn’t manufactured housing be positioned as an alternative to both? How can we move our message ahead the most rapidly and effectively?

ERNST: I think it should be positioned and I’ve often questioned in my own mind – you know, we like to claim that we’re the only form of non-subsidized housing. I don’t know if that’s a good thing or a bad thing. It’s always been touted as being a good thing, but at the same time, if you’re not a part of the government’s plans for providing or assisting people with housing, then that kind of puts you on the outside. I agree with you that the industry should position itself as a home that you can afford. You don’t always have to rent. But I think, and this is just a personal opinion, I still think that we’ve got to improve our image, and perhaps even the architectural appeal of our homes, so that they are more broadly accepted by what I will call the traditional home buyer. I think there are people who look for manufactured homes or who buy manufactured homes because they think that’s the only thing they can afford. At the same time, those same people may have had a manufactured home before or maybe currently live in one.

So I think that we’ve got to broaden our appeal. I think that we’ve got to offer good quality affordable lifestyles, whether it’s in a land-lease community or provide an architecturally comparable home for someone who wants to put it on a piece of real estate. And I think until we do that and can get the opportunity for urban and suburban placement of homes, because architecturally they are compatible with all other homes, I think that’s when we’ll begin to see a broader acceptance and a broader capability of maybe doing suburban developments with homes that just happen to be built in a factory, but they look like everything else.

MHMSM: You mentioned urban. I haven’t heard of many instances where there’s any of that. Is that a potential market for manufactured housing?

ERNST: There have been situations. In California, in Oakland and other places; there was one, I think, in Louisville and in Maryland and other places where non-profit groups actually did urban infill projects where there are a bunch of empty lots; and they had to change the architectural characteristics of the home for them to be compatible with surrounding products.

Also in Cincinnati; I remember Dan Rolfes did the project in Cincinnati. He worked with the mayor and several manufacturers and they did some gorgeous homes. Some of them were modular and some of them were manufactured. None of them looked like a mobile home. They all looked like houses and they were very compatible; they were really a little bit nicer than their surrounding properties, because it was in a much older area of the city. The experience from those has been that those homes have appreciated; they were very favorably priced, and it provided a place where young professionals could purchase a home, be close to the city, be close to the ballparks – that type of thing – without having to commute 30-40 miles.

MHMSM: Is there anything else you would like to share?

ERNST: I do want to clear up and offer what I think are some potential positives. The industry can get mired down in negatives pretty easily. We’ve been mired in negatives for a long time. I really think there’s an opportunity to have good open dialogue and meeting with people, at least at FHA, which I think could be a critical component of the whole finance picture for our industry. If we have a source, an insured source, who consistently… now just think about this for a moment. If we have a source, even with some tightened underwriting through the existing FHA guidelines, that will permit lenders to do the 620 to 660 or 680 FICO score customer, you could have local banks, you might even have regional banks or others, make those loans where they are not participating in the market at all. I think that ultimately then, that will help the over-all industry because I think it will make available an insured loan product. And I think that’s an important part of it, too, because if you have community banks or someone like that making a loan that’s insured by FHA, if they do have to repossess the home, then their loss will be contained to an affordable loss as opposed to one that might be fifty percent of the unpaid balance.

I’ve worked with community banks, and once a board of directors sees a loss where you might lose 50 percent of an unpaid principal balance on a particular home, the next action is, “We’re not doing any more of those.” So I think this could open the door for some portfolio lenders who say, “Ok, I could do a couple million dollars worth of those, or five million dollars worth of those; we’re going to be insured, and we can still buy decent quality paper in there if we service it properly.” That’s one thing. And we mentioned to FHA that I think it would be very helpful if the industry and MHI in some way could help FHA create some sort of an educational program for new or prospective lenders in the Title I program, and even Title II, to educate them about our industry and about our home products and give them the tools they need to be successful in it. We don’t need any more failures in this business.

TK: I agree with that. You kind of touched on something indirectly right there if you’ve got an extra minute. Part of what FHA was setting up was this “ten million dollars plus ten percent.” What do you see happening to that?

ERNST: Well, I personally thought it was an overreach, that it was excessive. Because some of the best lenders in the industry, those that have been successful – and I’ll use Triad as an example – while they may meet the ten million dollar net worth requirements, the additional ten percent of all the outstanding securities that they issue is very onerous. Because if you operate in 45 states or however many they operate in, and if you did an additional 300 million dollars a year in FHA business, that’s an additional 30 million dollars in net worth that you’ve got to have. So now all of a sudden, your net worth requirement goes up to 40 million. That’s just too onerous. What we tried to do is demonstrate to them that that’s not necessary. We went back to them and said no, the average loss on these homes for the lender, while it may not be ten percent – it’s more like 15 percent.

There are some capped expenses that FHA has: they’ll only pay $1,000 per section to move a house (it may cost $1800 per section to move it); they’ll only pay seven percent commission on the sale of a repossession. You know, seven percent on a $50,000 deal is not a lot of money, and you’re sure not going to get a lot of people interested. The standard is more like ten percent, so there’s additional exposure for the lender.

If their actual loss experience is fifteen percent, the ten percent additional is still an overreach. It’s up to us to prove that’s what the lender’s actual loss exposure is. Vicki [Bott] commented that their data reflected that it was closer to 30-40 percent; I think that’s what she said. Well, if it’s 30-40 percent, then there may be a reason to have those excess net worth requirements. I don’t believe that they are. And the unfortunate thing [about those statistics] is that really, the only the only people involved in FHA Title I financing have been Vanderbilt and 21st Mortgage to any degree over the last five to seven years, and they haven’t done a lot of it. Everything else they have is so old and really not even applicable to today’s marketplace and the way people do business. And there’s more of a distressed marketplace situation. I don’t believe it’s appropriate to use those numbers or that they are applicable, but we’ve got to be able to demonstrate that we’ve got some more recent history and some more recent data that says it’s closer to 15 percent. Then we can demonstrate that maybe they can relax the rules to some degree. I’m also working on some other things that I’m not at liberty to talk about that might be another approach on that.

TK: One last question after the one last question. How much of a bump do you think a successful FHA program would represent to the industry in terms of shipments? We’ve seen a lot of numbers on that. What would your take be?

ERNST: Well, I know there’s a lot of disagreement with this and people are going to say, “He’s nuts.” I think there could be a 10-15 percent bump in shipments. That’s 5,000-7,500 shipments, because of the ability to reach the heart of the industry’s customer, the 620-660 or 680 FICO score customer. That being said, there are a lot of other things that have to be right in the marketplace, too. Right now in a lot of areas, we’re still seeing excess inventory of site built homes, a lot of foreclosed homes, a lot of deep discounts on those properties – and that still represents competition. And we’re still looking at a lot of uncertainly in economic times. That’s keeping people from being [at] the sales center and looking to buy. Another important point is that there are going to be a lot of homeowners out there who have the scar on their credit reports of having had a foreclosure. If everything else – income, job stability, all the rest of the situation – is good for a customer, how is FHA going to look at that? We don’t know.

TK: That’s a great point. Dick, thank you so much. Eric do you have anything else?

MHMSM: No, that was a lot of great information.

TK: I want to really thank you personally for your time and all this expert insight. It was very valuable and I think the industry will appreciate it.

ERNST: Well you’re welcome and I hope it’s helpful and I hope you don’t get too [much] criticism of it.

TK: A little bit of criticism is a good thing. I think this is going to be well-received and just outstanding material. Thanks so much.

This concludes our three-part series of an Exclusive Interview Report with industry consultant and once interim-president of MHI, DICK ERNST.

An MHMSM.com INdustry in Focus Exclusive Interview Report with industry consultant and once interim-president of MHI, DICK ERNST, Part Two

August 8th, 2010 1 comment

Dick Ernst Discusses Duty to Serve amidst the future of Fannie and Freddie and the potential return of private financing
Reporter Eric Miller with Publisher L.A. ‘Tony’ Kovach for MHMSM.com

We continue with the interview begun last week with Dick Ernst.

MHMSM: Even for Industry pros, there can be confusion with all the terminology, agencies, etc. Do you have a simple way or suggestion to help readers keep it all straight?

ERNST: I agree with the fact that it’s confusing. We’ve seen that recently in a couple of other blogs that were published. FHA is the Federal Housing Administration and it’s been around for years. The FHFA is the conservator for Fannie Mae and Freddie Mac and it was just recently put together to act as a conservator on behalf of the government. It deals only on the mortgage side of the business with Fannie and Freddie.

MHMSM: Will the FHFA go away when the future of Fannie Mae and Freddie Mac are determined?

ERNST: That is to be determined and I would expect that it probably would. I think it’s anybody’s guess right now. I don’t believe Washington really knows what’s going to happen to Fannie and Freddie; they still have huge issues and huge problems to work through. We’ve all seen the anticipated losses that the taxpayers are going to have to eat as a result of their involvement. I think there will be some privatization of that business, but the mortgaged-backed security market has to be alive and well and thriving. I think that there will be a continuing government role in some form of providing a marketplace, and it might focus on the low- to middle- and moderate-income families and affordable housing. That might be a better spot for them to play in. But it’s still too early to tell what’s going to happen to Fannie and Freddie and what role the government is going to play going forward, and whether FHFA continues to exist.

MHMSM: Any thoughts on the GSE’s Duty to Serve and how it can be enforced? Do you think the conservatorship excuse they have given holds water legally? If not, why not?

ERNST: There is a legal question and a practical question to be asked. Legally they are under an obligation, a legislative obligation, to create programs and it’s only enforceable to the extent that Congress is willing to hold their feet to the fire and say, “Look, you guys have an obligation to provide loan products to this industry because you’re only providing less than one percent of the financing that occurs when this segment of the housing market has historically averaged about 20 percent of the new single-family housing market. So it’s woefully underserved, and we passed legislation specifically for you to address it.”

That being said, the practical side of it is, who is going to put the pressure on it. Politically it could be suicidal because of the massive losses that Fannie and Freddie are taking. They would be saying “Oh, now we want you to go into this area of business even though there are some historical facts that this may have a higher default rate than what you are comfortable with.” I don’t think there’s many Congress people, including those on the housing finance committee, that really want to tackle this head on and hold Fannie and Freddie’s feet to the fire to say, “You’ve got to offer chattel financing, you’ve got to do this and you’ve got to do that.” There may be legislation there, but we’ve seen from a legal standpoint, obligations that the federal government has legislatively that they are just unwilling to address because of the potential political problems that exist for it.

MHMSM: Do you think that will be more palatable to address after they exit conservatorship, if that’s what happens?

ERNST: I think our industry is taking the right approach. We’ve always been big supporters of Fannie and Freddie, I guess in hope that they would step up to the plate and fill that Duty to Serve, and offer more programs and opportunities for a secondary market. We’ve made it clear to both agencies and the FHFA that the industry is willing to talk about skin in the game, talk about minimum credit qualities, talk about minimum equity requirements and have a good sustainable program. I don’t know that they’ve got the stomach at this point right now to take on something new. I think they’re overwhelmed with the size of the problems they have right now. That takes up the bulk of their time.

Once they’ve exited, I think we have to keep an open mind and say, “What is their obligation, what is their duty now to the housing industry, and what’s the role and how can we work within that?” I think the industry is taking the right approach to say, “Look, we’re not going to come out and say anything negatively against the agencies in terms of whether they should exist or not exist.” We continue to be hopeful that at some point it will provide us a source. We’re certainly not going to say anything about “take ’em private and the government should get out of this business” because I think that it’s a marketplace the government has to play some role in; we just don’t know how big or how much.

MHMSM: What are some of the biggest barriers to providing chattel loan financing privately? How can the Industry move beyond some of the past history of experiences like Conseco?

ERNST: Right now there is no asset-backed securities market. Chattel financing, up until the credit crunch occurred, was predominantly either being funded by portfolio lenders, or the asset-backed securities market was still providing some. I’ve got to back up a little bit here. Clayton Homes’ Vanderbilt Mortgage and 21st Mortgage were both big players in the asset-backed securities market until the early 2000s; and then when the cost of securitization became so expensive, they felt their own existence being threatened because of the cost.

I can remember in the early 2000s where if someone had a billion dollars worth of securities to go to market, they wanted securitization for a billion dollars worth of manufactured housing loans, they had to come up with an additional 200 million dollars in over collateralization to get that deal done. There aren’t very many companies in this industry that could withstand that for any period of time because if you have to do that for two to three years, then all of a sudden, you’re talking about $600 million dollars in additional over collateralization, and a lot of companies didn’t have that kind of excess capital or excess assets.

The landscape changed dramatically for our industry after the blow-up, if you will, of the sub-prime credit purchases that we were doing in the mid to late 1990s, and I think it’s changed pretty dramatically, and I really don’t see it getting back to where it was. I think the asset-backed securities market will come back, but I think the disciplines many lenders have in their portfolio will open up an opportunity to do some securitizations, because the credit quality is so high and the default experience has been very good on that higher-credit-quality customer.

MHMSM: Will there be a process and what will the process be for public finance returning as an option?

ERNST: The process is a comfort level in the capital markets. I’m sure you’ve read where there’s beginning to be some opening up in the mortgage-backed securities market as well as some asset-backed securities classes like automobiles and other things like that, where there are some asset-backed securities deals being done. Slowly I think, because of demand or the need to invest capital, I think that ultimately there will be that opportunity to do some asset-backed securities with some pretty high-quality manufactured housing loans. Some of the more recent loans that were securitized by Countryplace Mortgage and Origin, some of those had average FICO scores of more than 700. It was pretty high-quality and for the most part, those have performed very well. I think it’s a matter of investor confidence and sitting on a lot of extra capital right now that they need to get invested; but they want to invest it in something that’s going to have predictable returns and a predictable experience.

MHMSM: The manufactured housing industry experienced an easy-money, no-credit-score bubble in the late 1990s. That was repeated more recently in the site-built housing industry. Have we learned our lessons? What are those lessons?

ERNST: Who do you mean by “we”? If you’re talking about the manufactured housing industry, I’d say absolutely we’ve learned our lesson. I think there’s been a lot of slicing and dicing, so to speak, of that business that was purchased prior to 2000 or 2001; and a lot of people looking at the credit quality look at the way business was being done back then.I mean, we got pretty loosey-goosey back in the late ’90; and when I say loosey-goosey, it’s been reported Marty Lavin (who is kind of a statistical nut and likes to look back at things) has indicated that more than a third of the businesses purchased in the late 90s had less than 600 FICO score business.

We know, based on experience now, that that business cannot perform. It’s not a matter of IF it’s going to repossess; it’s a matter of WHEN it’s going to repossess. When you’re dealing with low- to moderate-income customers, they have less leeway to be able to withstand an adverse event in their life, whether it’s an income interruption or whatever it may be; they have fewer assets, fewer reserves and less disposable income to withstand that event. I think we’ve learned.

The survivors do a lot of verifications now: they verify down payments, they verify income, they verify employment, they look very carefully at what the customer’s disposable income is going to be, what their other expenses are, what their family size is – all of those things now, I think, are being looked at a lot more closely. I think that the lower-quality credit customers are just not able to get those loans financed for the most part. If they do, through a company like 21st Mortgage, they’re going to have to have some significant equity in that loan or put up some collateral, perhaps land that they own or something like that, so they have more at risk. I think our industry has learned a lesson.

I can’t speak for the site-built industry. It’s been pretty devastating what’s happened to them. You’d like to think that everyone learns a significant lesson from this, but we all know there are a lot of cyclical events that occur in major markets like this, and we can only hope that everybody has learned a lesson.

MHMSM: What are your thoughts on efforts like Ken Rishel’s to move chattel ahead via establishing captive finance programs, especially for land lease community operators?

ERNST: I think the captive finance entities that Ken works with and a number of community operators that provide financing for their own customers is absolutely through necessity. You have to remember that land-lease communities have two potential benefits. Number one is, they tend not to focus so much on the profitability on the sale of the house. They want it to be profitable to some extent, but there’s less emphasis on the profitability and they want to have a loan that they can put in their portfolio. They’re willing to take a little bit more credit risk because they have much more control of that individual transaction with the site manager who can monitor what that customer is doing on a monthly basis and look for the signs that they may be having some issues; maybe look out there and see that the guy bought a new motorcycle or whatever it may be. Sometimes those can be things that create difficulty with a loan going forward. I think the captives are by necessity.

At the same time I think the captives in the future – and I don’t know how long in the future – but I think at some point in the future, there will be the ability to securitize those loans with someone with some pretty high leverage, or I should say low leverage. In other words, if you put a billion dollars in loans together, you might be able to re-coupe a half a billion dollars in capital. In other words, you might have to do a two-for-one type of deal because of the potential risk involved. Now, the larger communities – and to the extent they are well capitalized and have access to capital – I think you see folks like Hometown America and others who have done that and done it successfully, believe it’s necessary for their business model to support the communities, to create revenue-generating customers, revenue from those lots that they lease, and they think it’s important. At the same time, they’d love to be able to securitize those loans so that they don’t have all that capital tied up.

I think it’s going to continue; and the numbers that have been published – I have seen both from George Allen and others, and Tony’s numbers – indicate anywhere from three and a half billion to as much as six or seven billion dollars worth of paper that’s being held by these community owners. I do think the SAFE Act is going to cause everybody take a look at that and make sure they are doing business the right way; but at the same time, the captives are a necessary part of their business model.

Be sure to catch the third part of the MHMSM.com exclusive report with Dick Ernst when we discuss the SAFE Act and its impact on the Manufactured Housing industry and the extent of a potential boost from FHA financing.

Click for Part Three of this interview