by Eddie Hicks
If I am allowed to say that having been a part of the manufactured housing industry for over 49 years as a retailer, manufacturer, developer, and now as a mortgage broker specializing in LLCommunity financing, it is my humble opinion that there are three primary factors which have seen our industry's substantial reduction in new home sales from the last high water mark in 1998.
First, historically we have focused on buyers with sub-par credit, into non-age restricted LLCommunities at low prices which in combination with relatively low homesite rents, utilities, and services, were competitive with area apartment rents.
With the exception of the FHA Title I and VA programs, with no secondary market, so lenders went to private investors for the primary source of capital. Many of the chattel mortgage lenders in cohorts with an embarrassingly large number of unscrupulous retailers were happy to take badly underwritten "paper" on home sales to their investor base, because of the relatively high yield. Although this "bad paper" didn't represent a majority of the loans made, the resulting defaults was high enough to effect a financial crisis with investors. When they "woke up" and understood what was happening, their "adjustments" to underwriting, rates and other terms which were intended to reduce defaults, resulted in a substantial reduction in the number of approved loans.
Good for the investors, but bad for our industry.
Costs and difficulties of obtaining approvals and financing for new community development, many MH LLCommunity owners and investors were restructured for capturing profits from home sales within their communities and became "closed parks" effectively "locking out" retailers or charging "entry fees" for the sales of homes into their communities by outside retailers. This in combination with the nascent availability of almost site-built home equivalent 30 year, low interest financing, as the chattel mortgage business began to fail to meet retailers needs, non-community retailers almost completely abandoned home sales into communities, and concentrated on land-home transactions.
And, as a direct result, very few retailers sales staff retained a sufficient level of salesmanship and expertise to convince prospective home buyers of the many advantages of LLCommunity living, which all but eliminated non-community retail sales operations.
Second, difficulty in finding and the relatively high cost of fully entitled land for new community development in the context of a serious lack of viable chattel home financing programs, resulted in virtually no new community development in the past 12 years, in spite of the availability of the 40 yr, low interest, non-recourse FHA207m loan guarantee program that is made by private lenders. With the change of land use for many existing communities to other land uses, there has actually been a decrease in the total inventory of MH LLCommunity sites.
Third, and perhaps the most serious fact, is that many prospective buyers are not yet convinced that MH don't depreciate over time or depreciate home values in nearby neighborhoods. There is an outdated image that MH are poorly constructed when compared to site built homes, fall apart in almost any wind storm, catch fire easily and burn more completely and that the only people who live in them are truly second class "trailer trash.”In short: we can make great homes, at affordable prices which are well built, safe, comfortable, and which are a good value when sited in a well managed, LLCommunity. Getting buyers financed is still a problem, but the new revisions to the FHA Title I home financing program shows great promise. However, as good as our homes are, and even with viable home financing (and re-financing) terms, new communities won't be built until investor/developers are convinced that the public will discard the many untruths which continue to prevail without challenge, and accept the concept of owning a home on a leased homesite. ##
(Editor's Note: Eddie's article points to issues that are addressed by the plan found in the download at the end of the article on this page, linked here.)
(Editor's Note: Eddie Hicks is a member of MHSpeakerTrainer.org)