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Unintended Consequences Can be a Good Thing

August 15th, 2012 No comments

Dan Rinzema posted in MHProNewsAs I read Lance Inderman's, Tyler Craddock's and DJ Pendleton's recent articles, a number of things came to my mind. One of them was The Law of Unintended Consequences. The Law of Unintended Consequences states that any purposeful action will produce some unintended, unanticipated, and unwanted consequences. A corollary states that the unintended consequences can turn out to be even more significant than the intended action.

Except for the “unwanted” part, that is in many ways what’s happened with MHVillage since 2004, when my partners and I decided to invest substantial amounts of Datacomp’s money and employee time into it’s creation. I'll recap another time some of the good unintended consequences of MHVillage, but for the moment let me focus on something that could bring rapid, immediate value to an issue that was raised by Lance Inderman, Ronnie Richards and others here on MHProNews.com.

Some months back, MHProNews ran a story that featured a lengthy video interview of Kevin Clayton. In it, Kevin Clayton expressed what Warren Buffett told him one day. “Kevin, it seems to me that the problem of your industry is resale.”

Resale or a remarketing path is in part what makes conventional housing and real estate perform better.

Conventional home builders don't have to tell a customer what their potential exit strategy is. The home buyer knows they can sell it themselves (FSBO or For Sale By Owner) or they can use a Realtor to sell their home. But what do we have in manufactured housing that works the same?

While there has been discussion back and forth about possible resale mechanisms, or using a recent Supreme Court ruling to list and facilitate the resale of more manufactured homes, the reality is that all of those approaches have time and cost challenges. The only resource that is up and running right now today is MHVillage and our MLX system.

The MLX or Multiple Listing Exchange is a rapid, low cost way that the industry at large could be tapping into the potential revenue and enhanced resale value that arguably must be part of the future to manufactured housing success. That is important for lenders, who may need to sell a repossession, and would rather do it without moving the home. It is also important for homebuilders, community owner/operators, and retailers as well as those 9+ million manufactured and mobile home owners.

Lance Inderman is correct. We have a great product in manufactured housing. Beyond his points, what keeps more well qualified potential home buyers from pulling the trigger? A 750 credit score or cash buyer customer will ask or think the following question. “What is my exit strategy when it comes time for me to sell this manufactured home?”

When you as a manufactured homebuilder, community owner/operator, or retailer can look that 750 credit score or cash buyer in the eyes and say, well, “We have a large and active Internet marketplace called MHVillage where you can either list through a broker or sell your home yourself,” that makes sense to that strong prospective customer.

Frankly, it was beyond our expectations that MHVillage would become what it is today, where 45,000 visitors – about 85% of whom are retail home consumers – visit daily to buy, rent, and/or use other services that all drive dollars for the manufactured home businesses involved. That was a good unintended consequence for us and others – one that I hope to cover in a future article here on MHProNews.com. But beyond MHVillage, there are other efforts that make sense for manufactured housing that can get or keep us in front of good customers interested in buying a home.

For example, we see value to efforts like Tony Kovach's new consumer focused MHLivingNews.com website, which promotes the positive aspects of the manufactured home lifestyle. We plan to support, engage in and encourage that effort, including but not limited to, providing content for them. MHLivingNews.comcan help over time improve the industry's image, which Lance's article discussed.

We see value to this MHProNews site, which has become the most robust platform of its kind. Articles on best practices, news, issues and discussions of problems and solutions must take place in our Industry in order for us to move beyond survive to thrive.

There are also efforts being put in place from state and national associations to drive the industry past the regulatory and other challenges that we face. I'm sure there are other private and planned efforts beyond those mentioned here.

The point is that when we learn to work together using the resources that we have, unintended consequences will happen and can be turned in our Industry's favor. That won't happen by itself. It will only happen as more savvy associations, businesses, professionals and pro-industry trade media platforms pull together to make it happen.

We tend to think of unintended consequences as bad. But some can be good, especially when we recognize the forces at play and make them work in our favor. It all starts with simple steps, often simply making use of resources that are already available today. ##

Dan Rinzema posted in MHProNewspost submitted by
Dan Rinzema
CEO, MHVillage and DataComp

Greeting the Wolf with Shotgun in Hand

August 3rd, 2012 4 comments

I was talking to a member on the phone recently and he asked, “DJ, when is your ‘interim’ going to actually be an interim?” I simply had to laugh and politely remind him the association is and will always be full time. The most we can hope for during interim years is for something less than the 90-hour work weeks the Texas legislative session brings every other year. I had to laugh again at this ludicrous thought when I recently landed in Austin at 12:45 a.m. back from a quick trip to Washington, DC.

But there are no complaints here. When I ask members how business is and they give the positive response: “busy,” I always respond, “Busy is good.” The same is true for our association.

Our industry is also busy right now. Over the past several months we have seen an ever-so-slight improvement over previous years, but improvement is improvement. After three years we welcome a return to “busy.”

This year Texas’ national market share in shipments has been approximately 20 percent. In 2012 one out of every five manufactured homes sold was sold in Texas.

It goes without saying, but I’ll say it anyway – God Bless Texas.

Of course, everything is not bright rays of summer sunshine. This is depicted by the imagery of our front cover and the efforts underway that demand so much time and so many additional resources.

To read the article referenced in the image above, click the image or click here.

Before I go into the details and describe the issues and threats on our horizon, I want to acknowledge it is not my intent to scare the ever-living-life out of you. Our membership is diverse and we have differing levels of risk aversion. From a credibility standpoint TMHA does not want to be a “boy who cried wolf.” However, we also refuse to be oblivious.

There are ominous clouds on our horizon, and we don’t know how these potential storms will play out. New laws and regulations take years to become a business reality and still years more to be challenged and legally tested. The trouble is these new laws and regulations resulted from a pendulum swing caused by the subprime meltdown. With this significant slant, the penalties are far from toothless. I suggest one’s attitude toward future risk should be determined, in part, by the level of volume and personal money at stake in these regulated markets.

Mindful of the axiom, “Las Vegas is not built on winners,” we must remember the purpose of the Consumer Finance Protection Bureau. It is not their goal to allow lenient or flexible regulatory enforcement. Case in point: the CFPB already has a consumer complaint hotline and has dedicated a portion of its website for consumer complaints. The question I have is, “How does one know if the person being complained about broke any rules if the rules are not written?” And yet, this seemingly obvious logic did not get in the way of the CFPB from establishing a hotline first thing out of the gate.

So, whether you are hoping for the most defensible, fortified position in light of the new regulatory developments or you are betting true enforcement will never actually materialize, the reality is there are federal threats heading our direction. In this edition, we explore this and other key issues relevant to TMHA and your business.

The issues and dangers are perceived by TMHA’s Executive Board, Board of Directors, our national organization, MHI, and others in our industry as posing a significant risk to our Texas market and our national market. At TMHA’s Third Quarter Board of Directors meeting, it was inescapably clear that inaction at this critical time was not only too risky but too costly.

Therefore, TMHA pledged both efforts and financial resources over the next 12 months to join forces with MHI and others to navigate us through these treacherous waters

The possible successes of our efforts are unknown at this point. Regardless, I fear we will not come out unscathed.

Fundamentally, we first must learn if the regulatory powers care about this area of the housing industry. If so, do they trust us enough to make the changes we advocate? Both of these questions must be answered “yes” in order for us to have a fighting chance. Otherwise their massive regulatory locomotive will run over us.

I can assure you, any potential losses will not be for lack of effort, time, money or passion. Personally, I’m optimistic. We are an industry in unquestionable demand serving good consumers in an industry we passionately believe in. We will succeed, adapt, and thrive regardless of any final rules or regulations.

I recognize there are some who criticize our efforts. Some will continue to deem us another “boy who cried wolf.” To those critics I simply say, if it turns out we are the boy who cried wolf, at least know we did everything in our power to be ready. And, if the wolf actually does show up, we greeted him head on…shotgun in hand. ##

By D. J. Pendleton, J.D. Executive Director, Texas Manufactured Housing Association (TMHA) 505 W. 14th Street, Austin, Texas 78701 512-459-1221

(Editor's Note: The Texas Manufactured Housing Association, Chairman of the Board, Ronnie Richards, who is VP of Marketing at manufacturer and retailer American Homestar, spelled out in detail the concerns DJ's article is referring to, see Ronnie's well documented article here. These are among the reasons why association membership is more important than ever before in our Industry. To find your state, community or national association, click here. To paraphrase Ben Franklin, we will either hang together, or hang separately.

Information on the TMHA's annual event is at this link here. The dates are Sunday, August 19, 2012 – Tuesday, August 21, 2012)

Intolerant Tolerance

August 3rd, 2012 2 comments

Michael Barnabas posted in MHProNewsby Michael Barnabas

For the purposes of this column, it shouldn't matter if you are a Democrat, Republican or Independent. It shouldn't matter what your nationality, race, religion or sexual orientation happens to be. There are a number of trends in our land that should concern business owners, executives and professionals – including the 250.000 or so professionals involved in manufactured housing – that could bite you or others one day. We might call this trend, intolerant tolerance. We have potentially profitable lessons to learn from this, but there are concerns that must be understood and dealt with to avoid negative, sudden impact.

Unless you've been on vacation off the planet, you have likely heard about the controversy that has erupted when mayors in Chicago, Boston and other public officials have come out strongly against the expansion of Chick-fil-A in their respective areas. For example, the Chicago Sun-Times reports, Mayor Rahm Emanuel said that Chick fil A's values were not "Chicago values." He therefor wants to block a new job-creating location that the chain has in mind to open there.

Chick-fil-A's Facebook page says, "The Chick-fil-A culture and service tradition in our restaurants is to treat every person with honor, dignity and respect – regardless of their belief, race, creed, sexual orientation or gender."

Is there anything missing in that statement worth troubling ourselves over?

So why should that company be targeted by those who happen to hold a different personal viewpoint? Are we approaching a point where if your beliefs – or mine – don't happen to be the same as those of a local, state or national official, that we better fall in line, or else face threats against our business or profession?

Objectively – and sadly – one must answer this question today with a 'yes.' Which is precisely why we as business professionals need to take action at the polls and in jury boxes when called upon and in sounding off via letters to the editor and with public officials.

You don't have to be an expert in European history, or of Hebrew descent, or in one of these other groups to ponder the importance of the following:

First they came for the communists,
and I didn't speak out because I wasn't a communist.

Then they came for the trade unionists,
and I didn't speak out because I wasn't a trade unionist.

Then they came for the Jews,
and I didn't speak out because I wasn't a Jew.

Then they came for the Catholics,
and I didn't speak out because I wasn't a Catholic.

Then they came for me
and there was no one left to speak out for me.

This was originally attributed to German Protestant Pastor, Martin Niemöller (1892–1984).

Dan Cathy, the president of Chick-fil-A – whose views are the ones in question – is, to my knowledge, a Southern Baptist. So it was noteworthy when this public response came out on July 29, 2012 about the controversy:

Recent comments by those who administer our city seem to assume that the city government can decide for everyone what are the “values” that must be held by citizens of Chicago. I was born and raised here, and my understanding of being a Chicagoan never included submitting my value system to the government for approval…”

– Francis Cardinal George, OMI, Archbishop of Chicago.

Good for him.

What we are witnessing is a series of over-reaches by local, state and federal government. This isn't new, but it has reached a pitch in the last few years that is unprecedented in America for at least two generations.

The entire purpose of the American Constitution and our system of limited government is to protect citizen's from over-reaches by others who may wish to misuse the power of government to oppress others.

Thus the point by community owner –Jefferson Lilly– made in his recent Industry Voices column are spot on in importance, because his issue and this one both come back to this simple point about limited governmental powers under the Constitution.

Making many issues facing businesses – and manufactured housing – SIMPLE

We don't elect kings and queens in the United States. We don't elect dictators, benevolent or otherwise.

We elect officials who take an oath of office that calls upon them to abide by the strict limits of their office's powers. When government officials, elected or otherwise, go beyond their limited authority, the result is that someone's rights are being trampled.

This ought to be junior high school civics 101, but sadly, this is often not properly emphasized in too many schools. It is under-reported by too many in the media, because those reporting often have their own agendas. So many citizens learn about this much later in life; if at all.

The first question that should come to any U.S. Citizen's mind when government over-reach seems to be taking place ought to be: is this law or regulation constitutional?

The Bill of Rights was added to the Constitution as the first 10 Amendments.

Per Wikipedia, the First 10 Amendments to the federal Constitution are as follows:

1. Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

2. A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.

3. No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.

4. The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

5. No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

6. In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.

7. In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any court of the United States, than according to the rules of the common law.

8. Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

9. Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

10. The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

The reality is that we have drifted far from these Constitutional limitations. This has taken place to the advantage of a few and the peril of virtually all of us.

The Payoff for Standing Up for what is Right

What the long term consequences and outcomes of the Chick-fil-A controversy will end up being, no one can yet say. But what we do know is that in many cities across America, customers are lining up at their restaurants as a sign of support, as this photo from the Huffington Post demonstrates.

When driving past a Chick-fil-A location yesterday after the lunch rush, I couldn't help but notice a packed parking lot. CNN columnist Tim Stanley wrote: “…the sheer number of people involved in the Chick-fil-A Appreciation Day suggests that turnout will matter in November.”

There is a political reaction taking place. This is something that not only ought to be happening, but is something manufactured housing professionals ought to tap into in our own struggles with regulators and public officials.

Applying this to Manufactured Housing

Might we – with the right foundation and approaches – benefit from the over-reaches of government, as Chick-fil-A seems to be gaining from the over-reaches of Big Brother minded public officials?

There has certainly been a call by some state associations and MHI to involve manufactured home owners in our issues. The MHLivingNews website is in the ideal a concept in that mold. What impacts us, on matters such as Dodd-Frank, impacts manufactured home owners too, as Ronnie Richards compelling article points out.

There is something that must not be missed here in why Chick-fil-A seems to be benefiting from this attack on their liberties. The obviously have loyal customers. Manufactured housing does too. What we must do is intelleigently tap those manufactured home owners in positive fashion, to line up there interests along with ours. We must care for them, as true professionals do, so they in turn will care for us. This is part of the dynamic working well for Chick-fil-A.The article linked here describes a Texas bank that will challenge the constitutionality of Dodd-Frank. We need to take every possible step at limiting the impact of that ill-conceived law, which has reportedly already resulted in most banks abandoning free checking to help cover the costs of this bill.

Public officials have to learn to live within their means, just as we do. Public officials must be reminded of the limits of their authority. Spending and regulations have to be reigned in, or else this slope we are on only gets steeper and more slippery.

Intolerant Tolerance must be ended.Tolerance should mean standing in solidarity and protecting each other's rights.

True tolerance and equality ought to mean that all citizen's have the same basic rights, duties and responsibilities. It doesn't mean sharing the wealth of others under the guise of 'fairness;' which would be a form of legalized theft. It doesn't mean equal outcomes.

Tolerance ought to mean mutual respect. It ought to mean you can practices your beliefs – or lack of beliefs – without the fear of having those beliefs imposed upon you by the force of government.

What Chicago and Boston's mayors, among others, threaten is political correctness on steroids. If you don't fit their 'values' your business could suffer. This type of discrimination is not new to manufactured housing. By learning the lessons of this episode, we could tap into the same dynamics that are playing out well at present for Chick-fil-A.

Part of the lesson is that we too should stand up for those whose rights are also threanted. As Martin Niemöller's verses above remind us, if we don't stand up for the rights of others, some day it may be our rights which are threatened. ##

By Michael Barnabas

(Editor's Note:Since Michael Barnabas' column on Getting Zuckered was published, their stock's value has dropped by over 50% from their high.)

Putting the Qualified Mortgage Dilemma in Perspective

July 19th, 2012 4 comments

Ronnie Richards MHProNewsThe Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010. The Act implements financial reform sponsored by the Democratically controlled 111th United States Congress and the Obama administration. Passed as a response to the late-2000s recession, the Act is bringing the most significant changes to financial regulation in the United States since the reform that followed the Great Depression. The biggest threat to the manufactured housing industry and the Texas Manufactured Housing Association is the impact the new more stringent regulations might have on loans under $50,000.

I did some research using sales data available on the Texas Department of Housing and Community Affairs Manufactured Housing Division (TDHCA MH) web site and the Statistical Surveys data my company subscribes to and it confirmed my concerns. According to TDHCA MH data, single section homes comprised 60% of new home retail sales for the five months ending May 31, 2012.

When I ran a retail selling price analysis in Statistical Surveys for the three months ending March 31, 2012, the most recent period available, I found that 92% of all single sections sold at retail had a selling price of $55,000 or less and 7% of multi-sections fell into that bracket. There were 1097 new home single section sales with lender liens titled as personal property (chattel loans) during the first five months of 2012.

Assuming 93% fall below a $55,000 sales price which with a 10% down payment would mean a loan balance of $50,000 or less, 1020 single section homes and 71 multi-section homes would be affected by the new regulations. That is 27% of all new HUD Code sales and 52% of all personal property financed sales.

I don’t need to tell you how that could affect our industry.

Just the manufacturer dues revenue which accounts for approximately 75% of TMHA revenue would decline by 27%. There are sixteen active HUD Code plants in Texas and if you assume a workforce of 150 at each of these plants a reduction in production could result in 648 Texans losing their jobs and that doesn’t even take into consideration the 55 active licensed out of state plants.

Texas currently has 747 active Retailer license holders and 1002 active licensed Retail Sales license holders. Based on a 27% reduction in sales due to the impact of the new regulation, we could see a reduction by 202 retail outlets and 271 retail sales licensees respectively. In total not even counting lenders, contractors, suppliers and so forth we might face a loss of 1120 jobs in our core member group.

The other impact which is difficult to measure is the new regulations could add significant barriers to affordable home ownership with no alternative housing options. There could be a an annual reduction in new HUD Code manufactured housing sales in Texas of 2650 units based on the current run rate if loans of $50,000 and less are highly regulated. Current manufactured home owners wishing to sell their home will find it very difficult to get financing for their buyers under the new regulations.

We can’t let this happen. MHI, TMHA and other interested parties are taking steps to educate those writing the regulations at the federal level about our industry and its unique financing model. The outcome is not guaranteed but at least we are attempting to influence the rule writing and not just sitting on the sidelines.

If you want to learn more about this and a broad range of other industry topics you should consider attending the Annual Convention of the Texas Manufactured Housing Association in Houston August 20th and 21st. You can learn more about all the business building and informational seminars linked at this site. It’s easy to register online at TexasMHA.com or call the TMHA office at 512-459-1221. All are welcome. ##

Ronnie Richards MHProNewsRonnie Richards is the Chairman of the Texas Manufactured Housing Association and Vice President of Marketing for American Homestar Corporation headquartered in League City, Texas.