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CFED’s Doug Ryan Sounds off on Consumer Financial Protection Bureau (CFPB) Report on Manufactured Housing and MH Financing

October 4th, 2014 No comments

cfed-logo-posted-industry-voices-guest-blog-mhpronews-com-.gifThe CFPB report supports what CFED and other nonprofit organizations have said in recent years:  Manufactured Home loan borrowers are vulnerable to expensive products and are often not well-served by the current financing market due to the lack of competition, lack of liquidity and the costs of the loans.

I have no doubt, as the Bureau reported, that many borrowers of chattel products could have qualified for traditional, less expensive mortgages but did not get the chance simply because they were not offered or made aware of the options. Indeed, one clear way to address this issue would be for industry to support titling reform that would give families the option to title their homes as real estate and the opportunity to access real estate loans.

The report supports, quite explicitly, the need for the Bureau’s current rules to remain in place and enforced. As the Bureau wrote, “the manufactured housing borrowers being charged interest rates or upfront fees above the HOEPA thresholds are the very populations that HOEPA is designed to protect."

I also believe that this report, and related efforts by industry and CFED and its nonprofit partners, offers an opportunity to develop new loan products, expand the pool of lenders and, ultimately, lower the costs of borrowing.

CFED absolutely believes manufactured housing must be part of the affordable housing solution in communities across the US. Far too many advocates and policy makers are unaware of the quality and aesthetic appeal of manufactured homes. There is no doubt industry has made great strides to modernize the energy efficiency, the design and the value of the homes. Quite simply, the CFPB’s report underscores the need for the financing to be modernized, as well. ##

doug-ryan-cfed-posted-manufactured-home-living-news-industry-voices-guest-blog-mhpronews-

Doug Ryan
CFED
dryan@cfed.org

 

 

Related Links:

1) – MHI's Response to CFPB's Report (Note, the MHI link includes the full CFPB report as a free download)

2) – MHARR's Response to RV legislation and CFPB's Report on Manufactured Housing

3) – CFPB Report on Manufactured Housing Signals Areas of Future Concern

4) – Manufactured Housing Institute Responds to Doug Ryan-CFED commentary on CFPB report on Manufactured Housing Finance

(Image credit: Corporation for Enterprise Development (CFED logo.)

(Editor's Note: As with any opinion column, the views expressed by Mr. Ryan are his own and/or those of the organization he works for, and should not be construed to be the views of MHProNews or our sponsors. Other viewpoints on this or other industry topics are encouraged.

MHProNews plans an Industry in Focus Report using extensive comments from a range of industry professionals on this topic. Watch for it mid-week at the news/reports module link above!)

Exhaustion Sets In

August 8th, 2014 1 comment

I’m exhausted, Jerry, exhausted I tell you. “Exhausted, Marty Boy, why?” Well there are many reasons, and in trying to sort it all out, I’ve exhausted my feeble brain.

I speak of course about the state of the industry. It starts with L. A. ”Tony” K, the MHProNews impresario, whose boundless industry enthusiasm doesn’t quit. Now all this, mind you, as we scrape along on an annual shipments level which in the past we equaled and surpassed in a single month.

Getting your head around that enthusiasm is hard to sort out. So many reasons why MH should be great but woeful results, that’s what is exhausting me.

Story Time

Let me tell you a little story. Sometime along the mid 2000’s, say 2006 or 2007, I was invited to join Urban Land Institute, ULI, a well-known and respected real estate trade association/think tank. It is populated by some of the largest and most powerful real estate interests, a pretty awesome “who’s who” of the Big Boys in real estate.

Inside Trailerville then were people who had come to our industry from the real estate industry and thought manufactured housing communities was a land use that should be represented at ULI. An MH council was formed and I was invited, along with 30+ others, to join and was frankly flattered to accept. ULI has a great reputation.

I started going to the ULI meetings and the MH luminaries were everywhere in the council. My consulting assignment at Fannie Mae at the time profited from my attendance as I was at the industry’s train of thought at the highest level. All good, right?

First Class

Now, understand something, ULI is not MHI or MHARR. ULI goes first class only, no Motel 6’s here. They meet at the very highest level venues, read this to mean “Expensive,” and invite powerful and well-known guests and speakers. Contrasting this with the MH world is eye-popping. If one spends an average of $1,000-$1,500 to attend an MHI convention, ULI seems to come in at $4,000-$6,000 per conference, a not inconsiderable sum for poor boys like me who peeled those dollars out of my own back pocket to attend.

I don’t really mention the cost of attending an MHARR meeting, as long distance phone rates are so low that the occasional MHARR meeting takes little time and virtually no expense. Networking is not really what MHARR is all about.

Lacking Candor

Back to ULI. I found most of the early meetings of the MH council, or whatever its name, a poor version of MHI meetings. While the intent was to foster an exchange of ideas and information from the very highest level of MHdom, the Big Boys were there, but they were all wearing vests so they could keep thoughts and information close to their vests. Even when we were to break for lunch seemed to be a secret. The lack of candid response from participants, who seemed to be going through the motions, disappointed me.

Here we had the greatest minds in MH, but I could gain better industry knowledge and information from the third string attendees from the same companies at an MHI meeting, at 1/3rd to 1/4th the price. I was beginning to waiver about my continued involvement in ULI.

Excited

Then, a ULI conference was announced, where the MH council was to feature a housing study by a prominent economist whose expertise was in housing demand. Whoa! Here’s something I could get my head around. Maybe after the study was presented I could relearn the words to “Happy Days Are Here Again” which in ’06 or ’07 I hadn’t sung since that 1998 post-HUDcode record of 373,000 home shipments. The best industry performance since the 1973 573,000 homes shipped, which had occurred when I was a young man and before the HUDcode.

The economist came, the lights went out, and the demand charts started to flow. Holy craps, Robin, get that song out! It was back. So I kept following the economist’s report carefully and he said the same things then we are still saying today: low cost housing demand, high conventional housing costs, factory built quality, yada yada yada, it was all falling into place, Jerry. Music!

But despite the obvious buy-in by most participants there, their choirboy gleams revealing, I had the uneasy feeling that, just as I do today, of an unfinished report.

Finally, biding my time, as I was as insignificant a participant as there was there, I screwed up my courage and asked the following: Yes, of course, I understand the demand side of the MH equation, but can you tell me, Mr. Eminent Economist, how your exuberant MH sales expectations will be financed?

What?

Huh? He was a housing demand expert. not a finance guru. He hadn’t the slightest idea as to how it would be done. Note that as you hear all the reasons today why MH should be kicking housing azz, that question remains unanswered for the most part.

I could see narrowed eyes around the room directed at me, the thought clear on its face; how dare you, you F’ing Azzhole, challenge Mr. Eminence? He just returned from Mt. Sinai with this report! I though it a fair question to ask, just as I do today.

In 1972 I came into the industry. By the time of the ULI economist meeting I had been kicked around HUDville 35 years. Even with my extraordinarily thick cranium, some knowledge had managed to creep in. By the early 2000’s I had seriously begun to question whether the 1998 shipments top and heavy decline thereafter was a “normal pullback” as had happened frequently in the past. Ah, it will all be back soon was the industry refrain. If I believed that early on, by 2002 there were clear signs to me this time was different, very different.

Not This Time

Working against the industry grain, my study of MH loan performance, the horrific losses suffered by lenders and their investors, got me to thinking the industry had real, long-term problems, from which recovery would be difficult, at best. Did I envision a drop to 50,000 annual HUD shipments? No, I was not born in swaddling clothes.

Further, and this was hard to grasp and accept, since the industry’s real volume emergence in 1969 to the 1998 top, the great volume the industry enjoyed was based on faulty lending losses by most lenders during that period, averaging close to 250,000 annual shipments. I then did the presumptive math on what volume might be with a rigid, but survivable lending regimen, and the numbers were scary low. Not as low as they got, but low.

If you don’t understand the preceding paragraph, read no further until you do. Every time you hear of glowing future prospects for HUD Code homes ask the predictor “How will they be financed?”

Huge industry volume subsidized by huge lender losses. It was an illusion, and it went on so long we all believed it would always continue. When I wrote about this early on in my Newsletter, “Marty’s News and Notes,” I can say the concept was neither generally accepted nor was my writing and lecturing about it well received. Let’s just say I was not the industry’s Favorite Son.

The Book

Fast forward to the present. I just plowed though “Dueling Curves; The Battle for Housing” by Bob Vahsholtz. This is a prodigious work, with the slant from a man well familiar with much of the industry’s early years and a home designer with great home building knowledge. His book is worth reading for the history lesson and for his ideas for reviving the industry going against the site builders.

I sought the answer from his book to my “How will it be financed?” and found in his multiple step program to improve the industry the following on finance:

Accept the penalty of chattel financing or leasing and use it to include such necessities as skirting and exterior storage. Repos should result only from family disasters and crooks. Even better financing – even from local small-town banks – will come with a proven track record. Good affordable homes need no subsidies. Earn a solid reputation from performance rather than waiting for the government to enforce its arguable notions of engineering and financing.”

Very little to argue with there, but will that guide us back to 150,000 to 250,000 HUDcode homes? Annually? I wouldn’t hold my breath.

Phewff

Exhausted, Jerry, exhausted, I say, that questions just exhausts me.

Let’s be clear here, whether I was writing my newsletter, on my consulting assignments, at ULI or MHI, reading Vahsholtz’s book, or discussions with L. A. ”Tony” K and others, THE question which must be answered is to find a way to finance the demand for our housing, at a 150,000 to 250,000 annual sales level. The present sales level just won’t create a stable, growing industry.

So what is it that causes such low sales volume with such high demand? It is because a great part of our demand comes from a tier of people whose credit capabilities make them unfinanciable. Yah, Marty, no big secret there. And when we can finance some of our demand, it comes with a high tariff, an interest rate generally applied by Guido in his transactions These rates, often more than twice and even three times the present rate for site-builds, are needed to ameliorate our high default rates and high losses on defaults.

How?

Let’s deal with the most important reason for this missive; how does MH create demand that has a greater chance of being financed, assuming stupid lending money is not stage left, waiting to enter? How, indeed?

Sometime in the mid 2000’s, the industry commissioned a market study by Roper Associates to ascertain the public’s view of MH. Let me cut through the bull pucks, they reported they had never compiled a study where the industry had such a negative public perception. Oh, man, we finally were the best at something!

A lengthy industry discussion set in, mostly at MHI, meeting after meeting, innumerable committees, and finally a joint meeting with the RV boys to discuss the merit and results of their “Go RVing” campaign. The RV’ers were exuberant about their campaign and urged us in the strongest terms to do our own campaign.

The RV industry had a different problem than MH, just the opposite. Their customer demand came from buyers with good credit, they just weren’t seeing enough of them. On the other hand at MH, we see many customers, enough to fuel many more sales, we just don’t see enough customers with sufficient credit capability. We needed to find a way to get more credit capable people tromping our sales locations. The intent of the Roper study and the follow-up presentation was to lead to a campaign to induce more credit capable buyers to our stores. You know, a campaign to boast the image of the industry and consumer acceptance through increased positive knowledge.

Embarrassment

So meeting after meeting, discussions aplenty, and finally two outcomes, one embarrassing the other catastrophic. The first result was the campaign presentation meeting should have climaxed in a buy-in to move forward with the pros.

The initial presentation was hardly a finished campaign, but the MH Yahoos raised such a ruckus about their vision of what the campaign should be, that it turned into a bitching session of the first water. I saw MOBES who can’t spell “campaign” reaming the pros, turning into a bewildering babble of conflicting ideas. I found that in their other job, sales lot operators and LLC managers, carried out image campaigns, professing to know more than the pros, howling with authoritative criticism. The pros didn’t know MH. They, on the other hand, are the folks who brought you the 40-50,000 annual sales volume, so yes, they know MH.

I met one of the leaders of the campaign presentation after the meeting and he could only shake his head. Yes, not everything they had ever done for others went smoothly, but this was a different order of foolishness. He wondered why they had been hired, as the industry appear to have all the answers. Why, indeed?

Worse

But bad as that was, and yes I was embarrassed to see all of the negative comments I had heard about the industry from outsiders played out before me, the following was worse.

I don’t think I spill any secrets saying a small coterie of individuals run the industry associations. A cocked eyebrow from one of these Brahmins effectively ends any discussion. So the industry opportunity at salvation, already fleeting as all this occurred, tumbled completely due to the well-engrained industry principle, “never do anything that might help a competitor.” And the industry moment when there was still barely enough $$$ muscle to fund an image campaign passed, and with it the last of the passing life rafts.

Succinctly stated, so no one misses my meaning: The industry must find a way to attract a far more capable buyer to our sales locations, or what you presently see is what is likely to prevail. Chances are the image campaign train has left the station and another does not follow close behind.

Bear in mind that some people are prospering under the present scenario. Not too many, but a few, especially those with eyebrow power. Reduction of competition can be salubrious, even if it only consists of a larger portion of a smaller industry. I can only assume as the image campaign was eye browed down, people would know that, or at least suspect it.

No Mojo

So we now find ourselves as an industry with insufficient muscle to fire up any sort of campaign. Some have wondered whether social media or other Internet driven endeavors might substitute for the traditional media campaign we can no longer fuel as an industry, being a real block buster campaign driven by a $20-30 million effort, one that can successfully reach a broad segment of American consumers and educate them about the many advantages we claim for our housing, to attract those folks we so sorely need. Whether the vaunted Internet driven efforts can succeed, I have no knowledge, but I’ve seen no evidence it is being much attempted or positive residue therefrom.

Phone Call

Would it be that in 5 years someone calls me and says “Yah nana nana, you F’ing jerk. See I told you the ad hoc campaigns could work.” I’m not staying up nights in fear.

The years go by, the same silly things are repeated endlessly, about industry promise, the quality of the homes, the future of all homes to be factory built, the far lower cost, and on and on. All great stuff of course, but how do you sustainably finance 150,000-250,000 HUD homes annually? On that, which is the number one issue, the industry is remarkably silent. ##

marty-lavin-posted-on-mhpronews75x75MARTIN V. (MARTY) LAVIN
attorney, consultant, & expert witness
350 Main Street Suite 100
BURLINGTON, VERMONT 05401
802-660-8888 office / 802-238-7777 cell
marty@martylavin.com

Whew! What a Whirlwind 44 Hours

October 20th, 2013 No comments

That is the NCC Fall Leadership Forum: “Building a Vision For The Future” held this past week in Chicago. First and foremost, kudos to my very good friend Jenny Hodge. Jenny is Vice President of MHI’s National Communities Council (NCC) and responsible for organizing and bringing forth this exceptional event. David Lentz is to be commended for his leadership and vision for the NCC.

While on the train from Milwaukee to Chicago I reviewed the agenda just to be certain I was up for the show which began in earnest Thursday morning. There was no doubt in mind that we were in for a very intense Thursday and Friday morning!

Wednesday evening’s reception was a very nicely arranged meet and greet with appetizers and an open bar. It has certainly been some time since we've seen MHI in a position to host such an event.

The real work began Thursday morning. The fact is that there was something to learn for everyone involved in the Manufactured Housing Community industry (MHC) whether you attended one session or attended all of the sessions.

The attendees were made up of a mix from the community business. When there was a show of hands early Thursday morning it appeared that there was a fairly even split of community owners present. One third were smaller owner with less than five communities, one third with less than 10 communities and one third owners or more than 15 communities.

rick-rand-great-value-homes-l-sam-zell-equity-lifestyle-properties-els-chairman-jim-clayton-clayton-bank-chairman-industry-voices-manufactured-home-pro-news-.jpg

Rick Rand, Great Value Homes (l) Sam Zell, Equity Lifestyle Properties (ELS) Chairman (c),
Jim Clayton, founder Clayton Homes and Chairman of Clayton Bank (r)

In addition, in attendance were lenders specializing in community financing, manufactures who are interested in serving the community owners needs to provide homes for vacant sites, Real Estate Brokers who market and sell communities along home lenders and other firms providing resources to community owners.

As is not uncommon at events like this, networking opportunities were abundant. I am more than certain that new relationships were forged, deals discussed and ideas exchanged. That is part of what makes these interactive events such great opportunities for all segments of the industry.

For those who focused on the Build A Vision For the Future agenda, they were rewarded with session after session of individuals both from within the industry and from other industries sharing their knowledge and experience. Topics relating to marketing, selling, community relations and all the important component of customer service which forward thinkers in the MH Industry are working to accomplish. Not only did the presenters share their knowledge and experience, they also made time for provocative interaction and dialog amongst all of us in attendance. ##

(Editor's Note: Read more of Rick's commentary – plus photos – on the NCC Fall Leadership forum at this link here.

You can see NCC dinner cruise and event photos at this link here.)

 

rick-rand-great-value-homes-manufactured-home-pro-news-industry-voices-guest-blog-.pngRichard J. Rand
President
Great Value Homes, Inc.
9458 N. Fairway Drive
Milwaukee, WI 53217-1321
414-352-3855
414-870-9000 (cell)
RickRand@gvhinc.net

Lisa Tyler – at Walden University – Request for Correction Addressed to Princeton’s WordNet

April 12th, 2013 No comments

Dear Esteemed Princeton Wordnet representative-

 Princeton University is one of the leading educational systems in the country.  The school's reputation reflects the highest levels of academic excellence, prestige, accuracy, and leadership.  Articles written by Princeton educated authors are viewed as the ultimate authority on a variety of topics. In light of the level of confidence placed in Princeton affiliated publications, there is a growing concern in the manufactured housing industry on the Wordnet definition of “manufactured home.”

According to the Google search engine result that cites wordnetweb.princeton.edu/perl/webwn as the defining source, a manufactured home is “mobile home: a large house trailer that can be connected to utilities and can be parked in one place and used as permanent housing..

Obvious problems exist with this very outdated definition.

It may seem like a cultural vernacular that impacts a small percentage of the population. However, approximately 23 million Americans live in manufactured housing (Wilson, 2012). According to the 2007 American Housing Survey, approximately 8.7 million (6.8%) of the 128 million housing units were manufactured homes (Zhou, 2009). The 2011 American Housing Survey reflects the increase to approximately 9.05 million manufactured housing units.

Comprising the second largest percentage of all housing units in the United States (McCarty, 2010), manufactured housing has been a vital source of affordable housing (Wilson, 2012) and are typical of rural areas (Aman & Yarnal, 2010; Tighe, 2013). Housing experts recognize manufactured housing as the predominant source of unsubsidized, affordable housing for rural homeowners and tenants (Tighe, 2013). Not only does the misnomer influence inaccurate perceptions of the product, it can contribute to the marginalization of a significant population.

There are many peer reviewed works that include definitions available that could be used in place of Wordnet’s outdated version. Following are some examples that you may find useful:

  • Manufactured home: Housing structures produced in factories, then transported to site, and installed on designated lands (Zhou, 2009). Manufactured homes must be constructed to the standards of a uniform nationwide building code known as the HUD code (Dawkins & Koebel, 2010).
  • Mobile home: Slang word for manufactured home. Derived from the original classification of mobile homes as vehicles requiring registration with the Department of Motor Vehicles (Kusenbach, 2009). Prevailing term changed to “manufactured home” in 1981 (Wilson, 2012)

Manufactured homes construction occurs in a factory setting, transported to a dealership in another location to be sold, and eventually placed on site at a third location (Dawkins & Koebel, 2010). The manufactured housing construction process uses similar techniques, materials, and equipment as traditional site homebuilding (Nahmens & Ikuma, 2009). The main differences in the construction processes are location of construction and resources used. Manufactured housing construction takes place on an assembly line in a controlled environment (Nahmens & Ikuma, 2009) while exposure to natural elements determines site built home construction processes. Industrialized construction uses construction crews dedicated to specific processes on the assembly line (Nahmens & Ikuma, 2009), whereas independent contractors complete site built home construction processes at different times.

I hope that enough peer reviewed information has been provided to justify changing Wordnet’s definition of manufactured home. Princeton University and its affiliates greatly influence consumer perceptions of products. The recent economic crisis has resulted in housing changes for many Americans. The need for high quality and affordable housing is a pressing issue that must be resolved. The term “trailer house” was replaced with “mobile home” in the 1950’s (Burkhart, 2010; Wilson, 2012). The 1981 HUD code revision included the adoption of “manufactured home” as the prevailing term (Wilson, 2012). Thirty two years later, Wordnet is still referring to the product using terms such as “trailer house” and “mobile home.”

I respectfully request that the definition be updated to reflect the government and industry recognized term that properly represents the product. In the event that you need further proof to justify requested changes, I have provided a reference list of peer reviewed sources used in this letter.

Lisa TylerSincerely,
Lisa Tyler, DBA (ABD), MBA

References

Aman, D., & Yarnal, B. (2010). Home sweet mobile home? Benefits and challenges of mobile home ownership in rural Pennsylvania.Applied Geography30(1), 84–95. doi:10.10.1016/j.apgeog.2009.09.001

Burkhart, A. (2010, February 5). Bringing manufactured housing into the real estate finance system. Pepperdine Law Review, Forthcoming; Minnesota Legal Studies Research Paper No. 10-06. Retrieved from http://ssrn.com/abstract=1548441

Dawkins, C., & Koebel, C. (2010). Overcoming barriers to placing manufactured housing in metropolitan communities. Journal of the American Planning Association76(1), 73–89. doi:10.1080/01944360903401052

Kusenbach, M. (2009). Salvaging decency: Mobile home residents’ strategies of managing the stigma of “trailer” living. Qualitative Sociology32(4), 399–428. doi:10.1007/s11133-009-9139-z

McCarty, W. (2010). Trailers and trouble? An examination of crime in mobile home communities. Cityscape: A Journal of Policy Development and Research12(2), 127. Retrieved from https://atoz-ebsco-com.ezp.waldenulibrary.org/Customization/Tab/12486?tabId=5371

Nahmens, I., & Ikuma, L. (2009). An empirical examination of the relationship between lean construction and safety in the industrialized housing industry. Lean Construction Journal, 1–12. Retrieved from www.leanconstructionjournal.org

Tighe, J. R. (2013). Responding to the foreclosure crisis in Appalachia: A policy review and survey of housing counselors. Housing Policy Debate23(1), 111–143. doi:10.1080/10511482.2012.751931

Wilson, B. (2012). An examination of electricity consumption patterns in manufactured housing units. Housing Policy Debate22(3), 175–199. doi:10.1080/10511482.2011.648204

Zhou, Y. (2009). Two essays on American housing markets: The determinants of housing value volatility and the ownership decision for manufactured housing (Ph.D dissertation). Ohio State University, Ohio, United States. Retrieved from http://etd.ohiolink.edu/view.cgi/Zhou%20Yu.pdf?osu1243886980

Will we catch the Tsunami?

June 18th, 2012 4 comments

I'm so tired of reading and hearing the same ole worn out posts, articles and talk about how to fix our ailing industry. Can't we start using some imagination and common sense?

Don't you realize that there are 10,000, that's right ten thousand "BABY BOOMERs" who will be turning 65 years old everyday for the next 20+ years? Do the math: 10,000x360x20. I think that equals right around 73,000,000 or so. Don't you? Or do I have enough 00000's?

Come on guys and gals. If we can't make hay where the sun don't shine we need to stick our heads in the sand in the Sahara. Right now is probably the best time in the history of our manufactured housing industry. You think the 60's were great? You ain't seen nothing yet.

Anyone with any sense in their thick skulls and a few dollars in their hip pockets that can't see this avalanche coming needs to go down to their closest used car lot and apply for a job as a lot boy because you don't even deserve to be a sales person.

There's a tidal wave, no, a tsunami is coming.

Forget about all those run down, worn out, antiquated ole trailer parks with the plastic Flamingos stuck in the ground at the entrance. Let's start thinking about the future by using the past as our model.

Remember the 60's when they used to go out and buy a hunk a land, throw up some pedestals and some 12×60 foot concrete slabs and place a couple a doublewides and a single wide model in front of the entrance? Then viola…open the pearly gates and let the land rush begin?

Well, happy days are here again. Do you think us "knees and hips are gone" retires are going to be able to continue to work that property, climb those darn stairs, to get to their 2nd story master suite forever?

I don't know about you, but my knees have been replaced and I'm running on pure Titanium. My back ain't what it used to be and my eyes see 4 steps for every two. Not a good thing. I no longer need my two story, one acre spread with all the trees, pool, painting, planting and tending to property.

Show me a nice modest little one story with a pond and a few ducks quacking in it, along with a place to store my RV. Or put an "ADU" in my backyard so's I can keep my happy home and share the big house with my family and I'll be a happy camper.

Are you getting it yet?

Bottom line is that the Baby Boomers are the biggest and wealthiest demographic to come along in the history of the USA! We're sporting 1/3 of the USA's economy and will be spending about 1 trillion a year or so for a long long time.

That's $1,000,000,000,000. Do I have enough 0000's to get your attention? So why all the doom and gloom. Let's get this show on the road and quit all the belly aching.

I'm not suggesting that we re-create the same ole rag tag "trailer parks" of years past. What I'm saying that if RE developers (and I are one) can go out and develop beautifly upscale site built communities then why can't the MH community?

There's so much land out there waiting to be developed. Thousands of already approved parcels that went to moth balls in '07 because of the downturn that are ours for the taking. All we have to do is us a little imagination, ingenuity and put some to the 3 trillion dollars sitting on the sidelines looking for a place to put to work.

Come on. Remember the mantra of the "Field of Dreams;" "Build it and the will come?"

John Arendsen

CEO, Founder & Owner

TAG Real Estate Sales & Invest,

On The Level General Contractors &

Crest Homes Manufactured Home Dealer & Developer

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