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Most Manufactured Home Lenders Facing Major Changes Revenue Cliff for Some; Business As Usual for Others

October 10th, 2013 No comments

Wall Street calls this a “revenue cliff.” A sudden drop in cash flow. Dodd-Frank regulations that are set to take effect in mid-January 2014 will result in major changes in guidelines for most of our industry’s major Manufactured Home (MH) personal property lenders.

Among the non-captive lenders, the hardest hit will likely be 21st Mortgage Corp. This lender is expecting a decline of up to 47% in loan volume.

MH Retailers who rely on 21st Mortgage should brace for a sudden revenue loss of 50% – 75% including overall loan volume and an adjustment in origination fees.

This will be devastating for many.

An informal survey of our four credit facilities who primarily bankroll the MH chattel financing aide of the MH industry has revealed major changes expected by most, and business as usual for one lender.

Our lender headquartered in San Antonio, CU Factory Built, is at present reviewing their loan products and origination fee policies. Committees have been assembled, reviewing the new regulations and their guidelines.

Informed industry sources tell MHProNews, who advised us, that CU’s very popular “Step Rate” loan product will likely remain intact, surviving the new regulations.

However, this lender’s origination fee schedule could be cut by up to 50%, more closely resembling the origination fee guidelines of their competitor, Triad Financial Services. The final outcome is yet to be determined.

Thus MH reatailers and loan officers who rely upon CU as their primary lender need to brace for a “revenue cliff.”

Our office has learned that Triad, based in Jacksonville, FL, is expecting “business as usual.” Apparently their loan products and origination fee guidelines have been in compliance with the expected changes in regulations.

Our industry’s other major lender, US Bank, with their regional office based in San Diego, is being very tight-lipped about any changes. Their spokesperson recently declined to comment to us.

The anticipated changes in loan products and origination fees will impact everyone in the MH industry. As loan brokers, quite a few of our employees will be devastated.

Analyzing the changes at this juncture is like shooting a bullet at a speeding train. The best advice we can give you is to dig in and redouble your efforts in support of HR 1779 and related.

If each of us contacts our Congressional Representative and two U.S. Senators in favor of HR 1779 and its planned companion bill, there is still time to avoid this fiscal/financial cliff our retailers and communities who sell are heading towards. ##

dave-shanklin-mhmsm-com.jpegDave Shanklin
Loan Consultant
Empire Homes, Inc.
Santa Rosa, CA
800 – 401 – 3372
NMLS ID # 314463

(Editor's Note: All views expressed on MHProNews are those of the author, and may or may not represent those of publisher or our sponsors. We recommend that you contact the representatives of the lenders you work with and see for yourself what they expect. Take Action! You may also find this related article of interest.)

Action Alert: Don’t Let Lending for New Homes Dry Up on January 1, 2014!

June 12th, 2013 No comments

IN A NUTSHELL: If we do not get legislative changes this year, loans for home buyers could be EVEN LESS available afterJanuary 1, 2014.Yes, it can get even worse if we do nothing. Please help us by doing two things

1. Contact your Member of Congress to express your support for H.R. 1779 (information is below).

2. Please go to cosponsor.gov(http://cosponsor.gov/details/hr1779-113) and express your support for H.R. 1779 (you need to have a Facebook account use cosponsor.gov).

BACKGROUND: We have encouraged VAMMHA members and others who read this to contact members of their Congressional Delegation to ask them to cosponsor H.R. 1779. Members in the 5th District of Virginia are encouraged to contact Congressman Robert Hurt (who has already agreed to cosponsor the bill) to thank him for his support.

Here is what this issue is about: Reps. Stephen Fincher (R-TN), Bennie Thompson (D-MS) and Gary Miller (R-CA) have introduced thePreserving Access to Manufactured Housing Act(H.R. 1779).

The measure would amend provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would otherwise curtail the availability of credit needed by those seeking to purchase manufactured housing if action isn't taken..

Specifically, the bill would revise the High-Cost Mortgage triggers for manufactured home loans, and make clarifications to the Loan Originator definition as it applies to manufactured home retailers and salespeople.

These two areas of the law—which are scheduled to become effective January 2014—would substantially reduce lender ability to originate manufactured home loans.

Assistance is needed from VAMMHA members and others within the manufactured housing industry, in contacting their Representatives to request they co-sponsor H.R 1779.

More details are available in thisdetailed issue brief/action alert.

Here is what we need: Please take a moment to contact your House member and ask them to cosponsor H.R. 1779.

To help you out,here is a sample letter that can be faxed or cut and pasted into an email to Congressional offices.

If you need to look up your Member of Congress, please click herehttp://www.house.gov/representatives/find/.

IMPORTANT: Congressman Robert Hurt (5th Congressional District) has agreed to cosponsor this bill. So, if he is your Congressman, instead of using the sample letter, please contact him to thank him for his support.

The following resource information is also available:

Over the coming weeks, Sen. Sherrod Brown (D-OH) is expected to introduce companion legislation in the Senate. Additional information will be provided at that time.

Please be sure to share with us any feedback you get from your Member of Congress. Thank you for all that you do to support the factory-built housing industry in Virginia.

tyler-craddock-executive-director-virginia-manufactured-and-modular-housing-associationTyler Craddock, Executive Director
Virginia Manufactured and Modular Housing Association
8413 Patterson Avenue
Richmond, Virginia 23229
Office804.750.2500
Mobile804.980.1172
Fax804.741.3027
Emailtcraddock@vammha.org

IMHA-RVIC Executive Director’s Report from MHI’s Annual Meeting

October 10th, 2012 2 comments

mark-bowersox-imha-posted-industry-voices-guest-blog-mhpronews.com-75x75pxl-IMHA Executive Director Mark Bowersox attended the Manufactured Housing Institute's (MHI) Annual Meeting held earlier this week in San Antonio, TX.

More than 100 people attended the event, including representatives from 10 IMHA member companies. While MHI scheduled more than a dozen separate workshops, most discussed the ongoing regulation and legislation that challenges our industry at the national level. The Secure and Fair Mortgage Enforcement (SAFE) Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Anti-Money Laundering regulations continue to be the hot topics in nearly all meetings. In fact, MHI's Legislative and Regulatory Priorities remain the same going into 2013 as they were in 2012.

MHI is taking a two-tiered approach to SAFE and Dodd-Frank. First, they are promoting legislation (HR 3849 and S 3484) that would amend the existing Dodd-Frank legislation to increase the threshold on triggering a "high cost mortgage" as defined in the Dodd-Frank legislation. This same bill would also amend the SAFE Act to legislatively mandate some of the regulatory opinions currently contained in the Consumer Financial Protection Bureau's (CFPB) Proposed Rule on the SAFE Act.

MHI's hope is that this legislation will be passed during the "lame duck" session following the November elections. While several members of Indiana's congressional delegation have agreed to support these initiatives, I encourage all IMHA members to contact your Representative and Senators and urge them to support this legislation.

Secondly, MHI is seeking favorable interpretations of the law from the CFPB, the newly created federal agency responsible for regulating these laws. MHI has retained the services of SNR Denton, a Washington DC law firm specifically to lobby the CFPB on behalf of the manufactured housing industry. The CFPB isn’t expected to release new information before the November election but must distribute final rules by January, 2013. Although the CFPB is expected to review state policies to ensure states are regulating the SAFE Act appropriately, the CFPB has not yet addressed lease-option type contracts. These contracts continue to be a gray area and it’s possible that the CFPB will view these contracts as non-compliant and a way to skirt the law.

MHI staff reported that the CFPB auditors have begun levying fines against lenders, with Capital One and Discover being fined over $200 million each. The CFPB has the authority to regulate non-bank lenders, which includes manufactured housing communities.

Earlier this year we shared information with IMHA members through a variety of sources about the Anti-Money Laundering Regulations that went into effect on August 13 of this year. Many attendees at this week’s meeting had taken advantage of the template MHI created to help retailers develop an anti money laundering policy as part of their overall compliance program. This template was developed by Marc Lifset of McGlinchey-Stafford (MHI's law firm) and can be used at no charge to state association members.

I strongly recommend to anyone selling homes to review the seven questions from the template (see page 9) to see if your business is required to have a written anti-money laundering program, and to take the necessary steps to comply. At this time there is no plan to roll-back, repeal, amend or otherwise exempt manufactured housing from this federal regulation.

Click here to view the Financial Crimes Enforcement Network’s final rule on the Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Residential Mortgage Lenders and Originators. Click here to view or download MHI’s AML policy template.

Other notes from the meeting:

The 2013 National Congress and Expo in Las Vegas will be held at the Paris Hotel. The move was made in large part to a much better overnight room rate ($109) at the Paris Hotel.

MHI has retailer resources section on their web site. It includes valuable information on AML, Red Flags, Safe guards and more. I encourage all members to review these resources as a part of your ongoing compliance programs. As you can tell, MHI is working diligently in Washington on behalf of our industry. They have an extremely tough job trying to effect change for our niche industry in the enormous federal government. It is always a privilege to interact with and learn from their staff along with the other state association directors and industry leaders that were at the meeting. ##

mark-bowersox-imha-posted-industry-voices-guest-blog-mhpronews.com-75x75pxl-Mark Bowersox
Executive Director
Indiana Manufactured Housing Association – Recreational Vehicle Indiana Council
http://www.imharvic.org/

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.

The Train To Oblivion

May 16th, 2011 17 comments

The MH train comes off the tracks.

It took me a while in the early 2000s to recognize a sea change had occurred in MH chattel lending.  Always chattel lending had been a loser for virtually every lender involved in it.  But it had powered the MH industry to 20% of all new housing starts, being responsible for up to 80% of all purchase money MH loans up to about 2000.

What always put new lenders coming into the industry to sleep is that with a growing loan portfolio size, the first 3-4 years of loan growth mask the true loan performance of the portfolio for the entering chattel lender.  But once the portfolio size stabilizes, one can gauge the true portfolio performance going forward. It will show very poor performance.  The lender will usually panic, not knowing what to do.  The smart ones, not too many of those, will shut down the program right then and take their losses.  Most others will muddle on as the employees try to keep their jobs by assuring their bosses that they can handle it.  They never can.  The program will ultimately collapse as things get even worse.  “Take your losses now or take bigger ones later.”  Some choice.

Before year 2000, the process went through repeated cycles of this start-hold-collapse for chattel lending by innumerable lenders, starting in the ’50’s.  Always new lenders came lured by the “high rates” available in chattel lending.  Few seemed to recognize how difficult it was too succeed in MH chattel lending.  None wanted to recognize that it didn’t matter how high interest rates were, only how much of them you kept in the end.  All believed they were smarter than the previous failed lenders, and would do a better job than those before them who had failed.  Few did.  (Boy, did I tire of hearing that crapiola!)

But in the early 1990’s  Wall Street money came to chattel lending.  Those were happy days!  Money grew on every Tree, especially Green ones.  A bevy of retail lenders came from 1991 on, all of whom were going to out-GreenTree GreenTree, the industry giant.  All these lenders got easy access to “Wall Street” money, at least for a awhile.  The infamous Asset Backed Securities provided liquidity for loans as seldom before seen in chattel lending.  Since nothing had changed from the underlying difficulty of surviving chattel lending, few, if any, survived this bout as the industry peaked at 372,800 new home shipments in 1998, and started a descent which has yet to end.

It took me awhile to recognize this sea change in chattel lending.  Few of us foresaw the true depth of the problem.  But by 2001-02 I could see that this time it was different.  Always in the past new lenders had come to subsidize the industry with the losses they took with unsurvivable chattel lending.  In the past 50 years these horrific lender losses had allowed HUDCode factories to flourish, retailers to become millionaires and land lease community owners to keep parks full, even as many shamelessly raised rents.  Again, this was all subsidized by terminally flawed chattel lending.  It went unrecognized.

But worse, the Wall Street boys do not like taking losses up the butt and started to dissect the reality of MH chattel loan performance.  What they found was chilling.  Losses for the best paper in LLCs were in the 30-35% lifetime range.  In the scratch-and-dent category, losses sometimes exceeded 100%. But worse, now that they knew, they blabbed the information to the world.  Several Wall Street firms tracked MH chattel loan portfolios closely and put out monthly reports of the carnage.  This differed from the past, when lenders, mostly banks, S&Ls and credit companies took their losses and seemed too embarrassed to tell the whole world of their travails.  After all, just a year before they were widely touting how great the chattel MH portfolio was performing and the great contribution they were making to “affordable housing”.  That would change soon enough.  Little did they know then how great their “contribution” was to be.

Here is an interesting sidelight:  I’ve identified above the recipients of the lender’s losses.  Note I did not include the borrower.  Yes, they got into a home they should not been able to buy, but they hardly ever got to keep the home.  Either they couldn’t afford it, or when they tried to resell it, they were unable to, for a variety of reasons.  This brought divorces, loss of home, children changing schools and all the other personal tragedy the loss of a home brings.  Few apologies here by the industry.  “We gave them a chance at home ownership was the industry refrain.”  Swell.

By the time GreenTree/Conseco collapsed around 2001-2003, the MH chattel world had changed.  Forever.  Most did not recognized it.  It was said to be just a periodic pullback.  The industry would return, they said, it always had.  Lenders had lost their nerve.  We could get the GSEs to bail us out.  We could get “Duty to Serve.”  If they won’t do it, then Title I will.  To this day we have Pollyanna’s carping this drivel.  “Its simply a matter of better sales training.  Now subprime is done, it will allow MH to return.  (Forget MH chattel lending is the King of Subprime.)  We are the only provider of non-subsidized affordable housing.  Its simply a matter to fix HUD Subpart I.”  In the face of a 90% reduction in volume, can it be that these thoughts still drive an industry?  It seems unimaginable.  (New to MH and the Subchapter I quest?  It is a part of The Manufactured Housing Improvement Act of 2000 dealing with recalls, home installation and handling consumer complaints on MH.  Like Don Quixote, the industry DC operatives, live to believe that only these DC quests are important.)

Around 2005-2006 the industry still had enough muscle to have faced that we were operating from a Failed Industry Model.  The Roper Survey told us that.  All of the reasoning above would not save us.  Only an acceptance that drastic measures were needed could have changed it for us.  Since we refused to act, “The Market” did it for us.  It punished tone-deaf MH business behavior with ruthless abandoned, and is still doing it.  The industry still doesn’t listen, though one wanders whether trying to really do something about it would have any impact at this point.  Frankly, I doubt it.  The high home value depreciation and high loan losses at increased loan volume seem impenetrable.  We have failed to move against this, even if it is possible to do so, which is daunting at best.

With Dodd-Frank and SAFE in place, and other regulatory devices sure to come, the impediments to an easy, even a difficult industry response are many.  n the face of this we are still worried about Subpart I?  Were we to get everything we wanted there, how many more homes would we sell? Heaven help us that this is the response of a terminal ill industry by its leaders.

As with all struggling businesses, the industry has scurried to try to make up for the existing industry model deficiencies.  Don’t have Greenseco-type chattel lending available?  Heck, start some buy here-pay here and create your own.  Want to keep rents coming in?  Buy homes and rent them out.  Many came to MH to escape the apartment business, but are now doing a version of apartments far worse than real apartments.  Overlook the regulatory constraints, the illiquidity of self-lending loans, roll up your selves and go to WORK, boys and girls.  Hey, it worked in the past going back to the 1950s.  Oh, really, and how did they handle Dodd-Frank then, did you say?  Or SAFE?  Oh..

Its a changed world and having lost our own lending business here we’ve transacted since 1972, we are impacted as are most others.  We are not and will not be alone, as the industry gets closer to 40,000 shipments than to 50,000.  At those numbers, I can only assume a whole new tier of businesses are endangered, as most of us scramble to avoid facing the prime business dictum:  Get out of a dead business.  This is bolstered by my own Prime Dictum:  “Never mind what people are saying, watch what is happening”.  And what is happening is an open book.  All can, or should be able to read it.

I suppose those folks who went to those long-ago industry speeches I gave, rolled their eyes then as I correctly prophesied the point where we now are, can point to their own acumen.  Come on Marty, it can’t get that bad they said!  Sitting there now with 50% LLC vacancies and unsalable self-financed loan portfolios as their response, they can take solace in their prescient course of action.  Of course.  Frankly, I would much prefer to have been wrong, very wrong.

So what does this all mean?  I hate to say it because I’ve tried to remain in the same industry as you have, but my industry left me.  Has it left you?  What is the next stop on this train to oblivion?  # #

MARTIN V. (MARTY) LAVIN
attorney, consultant, expert witness
practice only in factory built housing
350 Main Street Suite 100
Burlington, Vermont 05401-3413
802-660-9911, 802-238-7777 cell
web site: www.martylavin.com
email mhlmvl@aol.com

Editor’s Note:  We have honored the author’s request to post his article “as is.”  As with all our Industry Voices Guest articles, we invite reader response and dialogue, either public (by posting a Discus response below) or private (phone or email).  Thanks for reading and getting involved!