Those are the words of Sherry Norris, Executive Director of the Alabama Manufactured Housing Association (AMHA), commenting on the new modular apartments rising in downtown Montgomery, Alabama.  As we reported in the Daily Industry Business News Blog on May 27, the two city blocks where dilapidated housing once stood are not far from the governor's mansion.

MHMSM has learned from sources involved that Heritage View Apartments is a collaborative project of a handful of entities.  This modular venture is a first for several of them.

Heritage View Modular Apartments
Click photo for larger image

Southern Energy Homes (SE Homes, NASDAQ:SEHI) of Addison, Alabama, a subsidiary of Clayton Homes, is constructing the 66 modules for the apartments.  Michael Wade, Director of Manufacturing for Cavalier Homes, a subsidiary of SE Homes, and Project Manager for this project, said, "There are two city blocks designated for this project, and there will be 11 three-story modular apartment buildings, and each building will have five dwelling units for a total of 55 apartments.  Two of them are three-bedroom apartments, and three of them are two-bedroom apartments.  This is the Addison plant’s first multi-story modular project."

SE Homes has been in business since 1982, and has been building modular homes since the late 1980’s.  Even though their primary focus remains in the manufactured housing market, "in the last two years, modular construction has grown tremendously percentage wise," Wade added.

A modular unit is set in place.
Click photo for larger image

Wade said," Construction of the modules will take about three and a half weeks.  We should have 70 percent of the boxes [modules] set by the end of June."  He anticipates the units will be ready for occupancy in the fall.

The contractor for the apartments, Empire Construction, of Knoxville, Tennessee, laid the foundation, and will build the staircases, balconies, porch attachments, sidewalks, parking lots, and complete the landscaping.

Heritage View is a tax credit project under the auspices of the Alabama Housing Finance Authority, which allows investors to receive credits against income tax if they invest in specific projects in low income areas.

This encourages private capital to invest in distressed neighborhoods, and National Equity Fund, Inc. (NEF) of Chicago is a leading national syndicator of low-income housing tax credits.

Three-story modular apartment building
Click photo for larger image

The Tax Reform Act of 1986 led to its founding in 1987.  Since then, NEF has collaborated with over 700 entities, nonprofit and for profit, on 2025 projects that resulted in 121,725 homes with an investment of $8.8 billion, all across the country.

Summit Housing Partners, LLC, of Montgomery will manage the property.  Summit is the 9^th largest affordable housing owner with 11,109 affordable units, comprising 72 housing developments in the Southeastern U.S. and the West.

Alan Harmon is the project engineer from Multi-Family Business Development for Clayton Building Solutions of Maryville, Tennessee, and has been involved with modular homes since 1994.  His focus is on modular building for dormitories, apartments, town homes and other commercial applications of modular construction.

One of 11 modular apartment buildings to be completed by Fall
Click photo for larger image

Steve German (pronounced with a hard "G"), Project Manager for TCU Consulting Services in Montgomery, Alabama, is under contract to the Alabama Housing Finance Authority.  He monitors the project to make sure the developer is adhering to specifications.  This is German's first modular project.

German says, "Currently I go to the job site about once a week, which is more than I am supposed to.  But the way this project is moving, I'll probably be there more than I'm required to because so much can happen in a short period of time.  They were able to construct one building of 12 modules in one day, which is pretty interesting."

German said there will be a clubhouse for the residents, and there will be green space, so it's more like a neighborhood they are constructing, similar to other Summit housing projects.  This project is valued at $6.2 million.  Four of the eleven buildings have been set as of June 9.

MHMSM.com will keep reporting on this significant modular development, so check back soon.

Photos courtesy of the Alabama Manufactured Housing Association  # #

Matthew J. Silver
Industry in Focus Reporter, MHMSM.com
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317.840.0803

Exclusive MHMSM.com Industry In Focus Report

The March 2011 IBISWorld report that cited manufactured home dealers as a 'dying industry' has made news inside and outside of the manufactured housing industry. MHMSM.com has contacted a variety of Industry leaders and personalities from coast to coast to get their comments. On-the-record comments have included national association leaders, as well as professionals in factory-built housing from the manufacturing, retail, communities and lending sectors.

Messages, comments and calls to MHMSM.com from manufactured home industry professionals dribbled in at first, and then gained in volume as publications such as The Atlantic and Business Insider covered the IBISWorld report. As an example of mainstream media coverage, a TV station in Houston reportedly called a regional firm to interview them about the developing IBISWorld story.

Derek Thompson, associate editor at The Atlantic, penned a commentary that included these words:

"At the center of a perfect storm of boomer burnout, a brutal recession,
and a rapidly changing industry, the mobile home retail market
could be the worst industry in America. Here's why."

Photo from The Atlantic

"If I asked you to name America's least fortunate industry, your mind might go to record stores, obliterated by on-demand apps; or photofinishers, left in the cold as digital cameras turn Americans into our own photo editors; or fabric makers, where business is booming … in Shenzhen, China.

"But when it comes to unlucky industries, it's manufactured home (aka mobile home) retailers who really hit the trifecta. First they missed out on the housing boom. Then they felt the gut-punch of the recession. Now they might yet miss out on the recovery. That makes them America's fastest dying industry, according to a new report from IBISWorld."

"The (IBISWorld) report states 'demand is dwindling' and 'sales are stagnant because the industry is not innovating, and that sales are likely to continue falling in the coming years.' They go on to say, 'Manufacturers have made cosmetics changes to manufactured homes, but they have not been significant enough to alter their life cycle stage.' The report puts MH retailers in the 'Industry stagnation' category of declining industries.

"Are you kidding me? These are 'deeply researched answers'?

"First, the headline clearly comes from their marketing division as a means of grabbing headlines. The research is not about a dying industry but a declining industry segment – one of two long-standing distribution channels in the business.

"With MH shipments in 2010 at 50,000 or 20 percent of 2000 levels, it's not news that retailer revenues over that period declined. On that data, I'm surprised establishments are not down more than 56 percent. It suggests that the segment has excess capacity and additional closings are likely.

"Most surprising to me is laying the blame at the feet of manufacturers on the issue of design! From a ground-level market vantage point, that's misplaced.

"The industry's great declines came about as a result of, first, an industry-created chattel collapse where the seeds were sown in run-up to the 373,000 shipments in 1998. The collapse, and the repossession overhang which followed, began the decline like a skilled boxer's well-placed left jab.

"The right overhand came next in the form of aggressive sub-prime and predatory lenders in the site-built market. In that run-up, traditional MH buyers – who were harder to finance for MH as a result of the chattel collapse – were lost to site-built housing in an eerily familiar boom market.

"Dazed by the right hand blow to our collective heads, the left to the body that has people reeling now is the regulatory reaction – the SAFE act, etc. – to the clearly consumer-eating lending practices of the last decade.

"The results of this three punch combination are declines of the magnitude widely reported and felt, and like a good whack, the pain lasts a while.

"Innovation in housing design, however, is not the industry's chief failing.

"For those of us in the community market segment, in fact, innovation in new homes is a small issue – not a non-issue but a mere shadow of the aforementioned home financing issue. In fact, we are seeing demand for replacement and in-fill homes but only where we are able to arrange decent home financing. People want more efficient homes and the cost savings with new EnergyStar homes can be dramatic based on buyers with whom I've spoken."

(Editor's Note: The complete analysis by Paul Bradley can be found at this link.)

Other commentary in the form of articles proposed for publication, private and public comments followed. Thayer Long at the Manufactured Housing Institute issued this email as part of his response:

"State Execs & MHI Board:

"A very well articulated response to the IBIS report from last week by Paul Bradley which was just posted on www.MHMSM.com.

"I'd also just add that the sentiment at the Tunica Show, the Louisville Show, and the expected strong turnout at the Congress & Expo and the Tulsa Show and York Show later this month certainly don't indicate this industry is going anywhere.

"Tony/Paul - I hope you don't mind me sharing. We'll see you in Las Vegas. Thanks for your support.

"Thanks-

"Thayer"

MHMSM.com spoke with Danny Ghorbani at the Manufactured Housing Association for Regulatory Reform (MHARR) and to Thayer Long at the Manufactured Housing Institute.

Danny Ghorbani stated in a telephone interview that his comments were not the official position of MHARR, but represented his own views on the IBISWorld report and related.

Ghorbani stressed that the IBISWorld report represented the "failure" of "the post-production sector of the Industry" [meaning, MHI] in "serving that segment of its membership."

The MHARR official then referenced two previously published documents that do represent MHARR's official position, which were previously published on MHMSM.com in August and October 2010. These MHARR Viewpoint articles called for 'the post-production segments' of the manufactured housing industry to form their own national association; a thinly veiled vote of no-confidence from MHARR towards MHI.

MHMSM.com spoke extensively with Thayer Long at the Manufactured Housing Institute (MHI). The typically soft-spoken Long was quick to respond.

Long was at times tongue-in-cheek, at other points direct in his comments about the IBISWorld report and Ghorbani's often pointed comments on the matter. It should be stressed that Long's comments, which follow, should be viewed as his own, and not necessarily reflective of the official view of MHI.

In an exclusive interview with MHMSM.com, Long shared the following thoughts:

Thayer Long:
"If it is a dying industry, then ok, then I guess I quit! And if Danny wants to blame it on us [MHI], okay, what else is new? … I am still struggling to figure out what he (Danny Ghorbani) is doing right now. Name one thing that he has accomplished … in the past three years? What has he accomplished…? I would love for you to think about that and get back to me. What has he accomplished? We [MHI] win and lose some battles. But at least we try. We have accomplished some things. Except, except, except… [MHARR]…nothing….

"You caught me on a good day.

"That said, for 'a dying industry,' the numbers for Vegas [the annual MHI Congress] are looking outstanding. We are looking great. For 'a dying industry,' I heard from manufacturers that the Tunica Show was good.

"Show me 'a dying industry.'

"We are pacing ahead for community owners and retailers; we are pacing ahead for our attendance [at MHI Congress in Las Vegas] from last year.

"We've got more exhibitors than we did for last year.

"We have more manufacturers coming than we did last year.

"So, for a dying industry, we really are taking it on the chin, aren't we?

"Aren't you glad you get this unfiltered Thayer sometimes?

"I ask that in all seriousness [about Danny and accomplishments]. Maybe we had this conversation at the end of last year.

"We [MHI] throw out our score card every year. Judge us on that; judge us on our accomplishments. Judge us on that… I would love… I think frankly all associations should do that…' what's your score card?' Put it up against anyone else… I would love to see Danny's [MHARR's] score card.

"Now this is the problem.

"What Danny is going to say is 'that no matter what they [MHARR] try to do, MHI is going to try to undermine them [MHARR]. So it is an unfair question.' We are the 'big bad MHI' that 'represents large manufacturers,' which is not true. You can go on our website and see that we have single plant operators just as much as Danny [MHARR] does.

"Anything he tries to do, we 'undercut him [Danny Ghorbani], we undermine him.' That's not fair. So that's what he is going to play. We can do no right, in other words [with respect to Ghorbani's perspective].

"It is kind of like this whole IBIS thing; who are they?

"Okay, fine, they [IBISWorld] publish this report. Okay, it makes a headline; it will circulate around the Industry for a while. You know, people in this Industry should know better. They should just delete it. They should just move on.

"I'm mean, come on. I've got this forwarded by a bunch of state execs. You know. It is almost like comical, we can chuckle about it. Come on, really?

"What does IBIS do? What do they know? I'm not going to sit here and worry about it. It is ridiculous. You know, it takes up too much…(time)…I'm glad we are talking about it, but it is what it is. Tough. Let's move on.

"So we are 'a dying industry,' come on, give me a break."

MHMSM.com: If it wouldn't be for Communities…

"Yeah, Communities are retailers."

MHMSM.com: What percentage of sales is going into communities?

"Probably, relatively not the majority."

"How many communities are buying new? I've got to think that a big community [operator], like a Hometown [America], they will be lucky to do maybe 400-500 new homes a year. But that is a nice account for a manufacturer. That is a good question…

"We [MHI] could poll some of the folks. Do a little bit of sleuthing… [Maybe] about 1/3 [of total shipments].

"What was their point [IBISWorld]? That the Retailers are dying? Or that the Industry is dying?

"One could look at that very objectively and say that the industry is evolving into something different.

"You've got Clayton, which is more vertically integrated. You've got communities that are… picking up more of the slack.

"You've got business off… this goes back ten years. MHI really, really pushed this… a lot of manufacturers are starting to chase the builder-developer market.

"I talked to the large manufactures at the Tunica show, and that is where they see the future of the Industry. You will always have a retail market. But maybe the future of the Industry will be more of a builder-developer market [model].

"If you look at this completely objectively, you could just say that the Industry's model is just changing a little bit. Fewer retailers, but larger. I mean, look at the RV business. I talked to my counterpart at the RVDA… we meet once a month. RV dealers are very concentrated. One RV dealer serves a very big market area. Maybe that's the model. If that is a change occurring in the market place, is that a failure on the part of any one organization? Or group or people? It could just be the way that the business is evolving… is another thought that I had. To say that it is dying…

"…You know where I come down on that.

"I remember Ross [Kinzler's response] on this [Danny's argument that there should be a post-production and production sides of the Industry]…

"If he [Danny Ghorbani] is saying that the post-production side of the Industry is failing retailers, then I guess I could argue that the production side is also failing retailers and community owners. Because doesn't the production side need the post-production side to get to market?

"Maybe some of the production guys, some of Danny's production guys, better step up if they want to have a distribution outlet instead of just trying to divide the Industry."

Dovetailing with Long's comments, as noted above, was this excerpt from The Atlantic:

"…A new trend in mobile homes is for manufacturers to open their own outlets, so that retailers are bypassed.

"'I actually think the next six years are going to shape up for [mobile homes] really well,' said Thayer Long at the Manufactured Housing Institute. 'People are looking for smaller homes, and dollar-for-dollar, we offer the best house.'"

MHARR and its officials made no comment to Thayer Long's statements and questions pointed in their direction. However a source close to MHARR stated on condition of anonymity that they effectively do keep a score card, and they publish it routinely through press releases as their activities take place.

Arguably MHI's most award-winning retailer, Doug Gorman of Home-Mart in Tulsa OK, had the following to say in public commentary on the IBISWorld and related national association topics.

Doug Gorman:
"I certainly do not have the credentials to refute the recent IBIS report that labeled the manufactured housing industry as being on the verge of extinction. I also approach the subject with some trepidation as I majored in Marketing and I am keenly aware that most of the buggy whip manufacturers are no longer in business. In order to accept the results of the report from a market demand stand point, we would have to arrive at the conclusion that the demand for new homes priced below $70-100 a square foot will become no longer significant. We would also have to accept that this disappearance of market demand will occur as down payment requirements are poised to increase to perhaps 20%, while terms may be reduced to as low as 15 years. In the face of enormous down payment requirements and shortened terms for repayment, suddenly prospective home buyers are going (to) pass over housing opportunities in the $20 to $40 per square foot category? (Editor's note: meaning HUD Code manufactured homes)…

"We have had to endure ongoing discrimination of the allocation of lending resources even when the [federal] Duty to Serve language is rewritten to specifically cite manufactured housing. As a retailer, I do not see any shortage of willing buyers for the homes that we build. We do experience a series of problems related to recent acts foisted upon us by the federal government.

"I observed in a LinkedIn comment earlier that our industry trade organization, the Manufactured Housing Institute (MHI) is constricted by the composition of their membership from assuming the role of a being a strong advocate for individual industry divisions. Retailers would have to form an independent organization dedicated to retailers in order to have someone in Washington, DC truly going to bat on all the issues that retailers face. I don't see the numbers or the money being there for that to happen. In the mean time, we accept MHI with its wrinkles, knowing that the diversity of the membership does not allow for the extreme dedication to our needs that we would like to have.

"The Manufactured Housing Association for Regulatory Reform (MHARR) serves in that capacity for independent manufacturers and manufacturers need that dedicated representation as they have many issues affecting them that are completely unknown to other industry segments.

"Another theory being floated by some industry members is that a conspiracy is in play to undermine the effectiveness that the HUD Code provides and bring about its demise. If that theory is true and if the conspirators have enough influence, market demand will not matter. I am not smart enough to know whether or not a conspiracy exists to destroy our industry. I would say that if it does exist, it is experiencing reasonable success.

"We do face very difficult times as an industry. I have quipped on more than one occasion in the past few years that "absence of stress is death…and I am very much alive."

"As an industry, we have taken a beating for the last twelve years. Some of that has been our own doing and some from lack of fairness by government actions or inactions. If a conspiracy does in fact exist, I am too small a player to have much impact on stopping it. Absent a conspiracy, our company plans to move forward and provide our clients with great values in housing and outstanding customer service. Hopefully our industry can see itself through the balance of any remaining down turn and see an increase in shipments in the years ahead."

(Editor's Note: for the complete article by Doug Gorman on this topic, please go to this link.)

Among non-HUD Code factory builders responding to this IBISWorld controversy, Otis Orsburn of hybridCore Homes had this to say in a recent article:

"More importantly, how will manufacturer's respond with product evolution that buyers, lenders, and appraisers will support? The Manufactured Home Dealer network has historically been a successful channel of distribution for manufacturers. Without it, sales numbers will continue to dwindle and more manufacturing facilities will close. There are thousands of capable career professionals working at these Dealerships. Product innovation and development could resuscitate the patient and stabilize an industry that, by the opinion of those that report to business decision makers, is a dying breed. Does this new widget rise from the ashes as a manufactured home?…" Read The Death of an Industry (or not).

Industry observer

Steve Gulik

"Marketing is perspective. The current perspective obviously needs to be changed. On Retailer lot homes should be displayed in a manner so they mimic their site built competition (raised parameter or sunken base area would be ideal). Retailer websites should reflect the same commitment and professionalism / investment stick-built tract homes produce.

"The golden ticket may be a new market wide re-branding. A new product title. A different buzz word. For instance, 'cloud computing' … which is an enigmatic word that in reality is a simple re-branding of 'shared resources'. It's fresh, it sounds new but is simply a distributed network method that has been around for a years."

In another post, Gulik stated:

"Retailers need adapt or face the plight of any business not keeping up with the times. Being that so many retailers are entrenched in the methods of the past, this gives greater opportunity to those that embrace change as an opportunity.

"For instance, how many Retailers still expect walk-in traffic as their main means of sales? How many do not have viable websites that list their current listings? How many understand that SEO is just as important as having a website (if you don't come up on the 1st page of Search Results, you virtually don't exist)."

MHMSM.com's own IT and WebTech Manager, Bob Stovall, has also sounded off on the topic.

"Not only do the factories need to keep up with the latest technologies, everyone in the sales chain needs to also. Retailers and communities that refuse to communicate with their customers using the new tools will fall by the wayside.

"Those who believe that using the new technologies is only for the very young are not only missing the opportunity to acclimate a new generation (one that doesn't yet subscribe to past stereotypes) to the benefits of factory-built housing, they are also thumbing their noses at another huge potential market of retiring baby boomers. People 55 and over now constitute the biggest growth segment for Facebook.

"Those who haven't seen our 'Dominate Your Local Market' presentation yet, need to know we'll be presenting it at Congress in Las Vegas and at the Great Southwest Home Show in Tulsa in just a few weeks.

"Now is the time to have your online marketing strategy thoroughly reviewed with an eye to making more efficient and more cost-effective. That is just one of the things we do here at MHMSM.com to help ensure a healthy future for the manufactured housing industry.

"Please see Website Reviews."

Factory-built home retailer Dustin Youngdahl had this to say:

"As owner of Youngdahl Homes and someone who grew up in the mobile home…manufactured home…modular home industry, I'm excited about the future. With all down cycles and shakeups newer, better and more creative products & services will arise. The profits at the top of the bubble were great, but the challenges we face now will make us survivors that much stronger, more prepared to better help our clients and smarter at doing all the right things.

"The engineered housing industry will only grow and improve because our quality & efficiencies cannot and will not be ignored. The stereotypical metal on metal mobile home will be equated with great grandma & nostalgia rather than present day reality. The future of factory built housing is at the intersection of efficiency, quality and creativity."

Ken Rishel, of Rishel Consulting, regarding this controversy, said in part as follows:

"This issue is another version of the blind men and the elephant. Based on what we do, we see different parts of the elephant. That retailers are dying out should be of no surprise to anyone as it has been happening for years.

"I would disagree that the manufacturers are solely responsible, especially based on their build quality. Manufacturers (in general) can turn out products superior to stick built today. They turn out what their market (retailers) thinks they need. They are, market driven, and they build what the retailers will buy, because they are not able to operate a push - pull marketing operation. "

Chiming in on the controversy was veteran HUD and Modular home producer, Harry Karsten of Karsten Homes. Responding to a publicly posted comment, Karsten said:

"Otis,

"Very well written. I disagree with your analysis of the problem. The products in many markets are well designed and very suitable for conventional home buyers. The problem lies with the disconnect between the manufactured home and delivery to the site, available sites, financing etc. There may or may not be a demise of retailers but it won't be because of lack of innovation.

"Harry Karsten"

Modular and HUD Code producer Steven Lefler from Modular Lifestyles has been among the many others who have sounded off publicly and privately on this topic. Association leaders, rank-and-file industry members, owners, stockholders and employees have all been part of the strongest response to an Industry-related topic since the Haitian earthquake crisis last year.

No doubt the HUD Code home industry has its challenges. Some scoff at the concerns that the IBISWorld report has raised. Others express concern, manifest in the many calls and comments we have received on this topic. Some today are profitable and are even growing, while other firms struggle to survive. 'Now is the time for all good professionals to come to the aid of their Industry.' # #

Depending on which association you ask, a recent executive order on over-regulation is either a mandate for change or a simple political maneuvering. The White House issued an Executive Order earlier this month similar to one issued by President Clinton in 1993 to improve regulation and regulatory review.

A copy of Improving Regulation and Regulatory Review - Executive Order is available here

Read more...

A November 16 article in the Virginian-Pilot carried the headline Fast-moving fires pose special risk in mobile homes. At first sight, this headline would seem another instance where the media unfairly implies negative judgment on the quality and safety of factory-built housing. But the article then quotes fire officials who say modern factory-built homes are no more susceptible to fire than houses built on site. The issue is that smaller, more confined dwellings tend to burn faster. The article notes the improvement in fire safety of post-1976 homes manufactured to the HUD code.

For more on the topic, we called Foremost Insurance who put us in touch with several experts on the subject. Mike Cok, Senior Vice President of Property Products at Foremost says when you consider fire damage as a percent of the home’s value, manufactured homes can carry some added risk of fire loss given that manufactured home values are typically lower than site built housing (due to their affordability).

"If a site built house and a manufactured home both sustain $10,000 of fire damage, the portion related to manufactured home value would be higher," Cok says. "That is not the same thing as saying that fires in manufactured homes perform differently than site built, or that we have any data that suggest that there is greater frequency of fire in manufactured homes versus site built. We do not see in our data any increase in fire frequency with manufactured homes compared to site built homes."

According to Joseph Ostrowski, University of Farmers Claims Training & Development Specialist (Foremost Insurance is a member of Farmers Insurance Group of Companies), today's manufactured home construction is really not too far off from residential (site built) construction. Some manufacturers also offer a residential sprinkler system as part of their manufactured homes.

"We, as a training organization, also work closely with the Michigan Arson Prevention Committee to educate fire fighting professionals about manufactured home construction so they can better fight fires, help keep our customers safe and help the National Fire Protection Association."

A recent document provided by the Manufactured Housing Association for Regulatory Reform (MHARR) sites a 1985 study by Foremost that found the incidence of fires in manufactured homes was half that of site-built homes. In addition a publication from the U.S. Fire Administration, Fires in the United States, 1992-2001 indicates that while deaths and injuries per fire incident are higher in manufactured/mobile dwellings than in residential properties overall, ten-year trends in fires and losses have declined notably (between 48 and 57 percent) due in large part to strict standards established by HUD in 1976 for improving fire safety and by the use of improved building materials. Moving forward as more and more pre-HUD code homes are replaced, the numbers should continue to improve.

Jim Dietrich, senior vice president of sales at Roy's Home Center in Gables, Michigan says manufactured homes came to be known for burning quickly because they used to be built with paneling on the interior walls rather than sheet rock. Today, he says, manufactured homes are no more of a fire hazard than conventional homes.

"The drywall is not going to ignite," Dietrich says. "Manufacturers stopped using paneling in the late 1980s. We’re also now using non-combustible batt insulation material."

Thayer Long, executive vice president of the Manufactured Housing Institute was quoted in the article, saying mobile homes get an unfair rap. "There is nothing intrinsic about manufactured homes that makes them more prone to fires," Long says. "The materials used are exactly the same as those found in other structures."

In conclusion:

Q. Do manufactured homes burn faster?
A. Manufactured homes (homes built to the HUD Code) are engineered for fire safety and are statistically as safe as or safer than conventional housing.

by MHMSM Industry in Focus Reporter Eric Miller

The Indiana Department of Financial Institutions (DFI) has been performing outreach to manufactured housing retailers and communities in order to insure compliance with the SAFE Act. Mark Bowersox, Executive Director of the Indiana Manufactured Housing Association (IMHA) told MHMSM.com his organization was previously told by the state that enforcement would be complaint-driven, so the pro-active auditing was unexpected.

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008, known as the SAFE Act, is federal legislation that was enacted as a partial response to the mortgage crisis that regulators say resulted from a lack of appropriate monitoring, oversight and regulation of the intermediaries between consumers and lenders in the residential mortgage industry.

Mark Tarpey, supervisor at the Indiana Consumer Credit Division of the DFI told MHMSM.com the department has a certain responsibility as the regulator to actively insure compliance. In general, Tarpey says the outreach has found that compliance to be good.

"Some people are in the process of figuring out what they are going to do moving forward, how they are going to structure transactions, etcetera," Tarpey says. "We're there to help them figure it out."

The date for compliance for the SAFE Act and related state legislation was July 1, 2010. The DFI had previously distributed a Q&A on the topic, reminding retailers and community operators that anyone who is working as a mortgage loan originator would have to be licensed. The Q&A is available at www.MHMSM.com/c/20.

Both companies and individuals involved in mortgage loan origination activities are subject to the SAFE Act. Tarpey explains that anyone who is a creditor on a retail installment sales contract requires licensing. However, there are situations where licensing isn't required.

"There is an exemption that says if all the dealer is doing is giving the customer an application for a third-party lender, then that doesn't meet the definition of an originator," Tarpey adds. "That's one exemption."

The DFI also informed manufactured housing retailers if a title does not transfer, then that does not constitute a covered activity. With that comes a qualifier, however.

"We did caution whether they be a dealer or a community, that you can't use a standard sales contract or loan agreement," Tarpey says, adding that if a retailer is trying to make sure they don't transfer title, they need to draft an agreement that's more in the nature of a lease.

Any discussion of rates and terms is a loan origination activity that requires licensing.

Bowersox says a lot of it goes back to the phrases administrative and clerical or compensation or gain contained in the SAFE Act.

Tarpey says that officials visiting retailers and communities have found a general awareness of the requirements. In cases where originating loans is a substantial portion of the business, licensing will be advantageous. In cases where its not, those activities may be handled elsewhere. 

"If you're doing enough of this it's going to be in your interest to continue to do it," Tarpey says. "If you're not doing very much activity of this nature, then maybe it isn't worth getting licensed and you may want to figure out a way to refer customers to a third party and/or draft an agreement that is truly a lease agreement and not a sale type of transactions. All those are business decisions that need to be weighed.

"The landscape has changed in terms of what you have to do in terms of licensing for the entity and the individual."

Licensing is applied for through a nation-wide program where information is entered. The actual application then comes to the Indiana DFI or like department in another state for review.

"Once you get all your information in the system, then the process becomes simpler," Tarpey says. "We've tried to keep the process as streamlined as we can."

Officials from the DFI will be available December 16 at the Indiana Manufactured Housing Association to meet with members during a special SAFE Act roundtable.

Setting up a manufactured home in the parking lot of a big-box retailer like Target, Costco or Ikea is not a new idea, but a presentation at the recent meeting in Washington of the Urban Land Institute Manufactured Housing Communities Council adds some additional components that may help go beyond pushing new homes.

Lauren Shippy, Kendra Brill and Susan Gargano at Creative Haven Media & Marketing, a seven-year old company with 14 associates in Cherry Hill, NJ, took some time to explain their idea. They have used personal experience in the industry, combined that with marketing and branding tactics and have built a universal plan that would reintroduce the public to manufactured homes and address some of the ongoing stigma that comes with them.

Theirs is a three-pronged approach that includes 1) marketing, media, advertising and public relations, followed by 2) the actual display of a manufactured home at a big-box retailer, and then 3) seminars and other activities that would be mutually beneficial actions to address hurdles in specific regions, such as zoning and financing.

The plan would help potential purchasers to understand these complicated issues and navigate red tape that can make a home purchase difficult, but also help educate lenders and local officials on the product.

"One piece is tackling local hurdles, which would mean inviting the staff of municipalities out to experience and learn," strategic planning specialist Shippy explains. "We'd invite local banks out to talk about financing options. Also open up the door to the local community and hopefully encourage them to work through some of the stigmas that have been held in the past."

In their research, the team looked at past experiences including Lowes, which had provided Katrina Cottages through its stores. More relevant was a test-pilot in Costa Mesa, CA between Skyline Homes and Ikea, which met with considerable success.

Not only did Skyline contribute additional sales directly to the event, but Ikea was able to move product displayed in the homes.

A lot of retailers the team approached were open to leasing parking lot space, and some were interested in cross-promotions. A retailer would have a chance to display items that might sell better in an actual home setting.

The idea for the marketing plan came in part from looking at how the auto industry operates through retailers. One disconnect in the manufactured home industry is that home buyers typically work through real estate agents. A customer unfamiliar with the sales channels for manufactured homes may get lost in the process or introduced to a stick-built product before they are ever introduced to a manufactured home product.

The team at Creative Haven agrees that Americans associate strongly with brands. While this plays out easily in the auto industry, for example, the brands of manufactured homes are not so obvious. The product can be helped through a match-up with a brand-name retailer.

"If Cavco did a display at Target, I think the idea is they go to Target and walk in the home," Brill, who focuses on research and analysis, explains. "I don't think at that point they care who makes it, they just care what it is. The third-party reference is important. The Target customer associates themselves with Target and the Wal-Mart customer associates themselves with Wal-Mart, there's very little crossover."

Which retailer is approached would depend on the demographic the specific home was created for and who was investing in the campaign.

The plan is designed to be universal and widely applicable. It can be used on a small, regional scale by a manufacturer or community owner, by a retailer or by a partnership between parties – wherever there is openness to new markets. It can be used to promote anything from vacation cabins to single-family homes.

"I think the goal of what we were trying to do with a regional campaign creates demand and addresses the stigma," account development specialist Gargano explains. "Hurdles vary region to region. At the regional level we can come up with some factors that would address those hurdles." 

Interest at the presentation in Washington was mixed. Some felt the idea of placing a home at a big-box retailer was tried before, but Shippy says the ones who understood the universal and comprehensive nature of the plan responded well to the idea. For those who didn't, she noted there was generally nothing negative that could be said for experiences of past partnerships with big-box retailers.

Most importantly the plan aims to remove the hurdles the consumer often encounters when exploring the purchase of a manufactured home.

"It's a foreign concept to somebody who doesn't normally buy that type of home," Brill says.  "The way we approach this really allows the manufacturers, retailers and community owners to be in the driver's seat while addressing some of the long-standing hurdles."

"Getting on a website and loving the product doesn't mean someone will make an effort," Shippy continues. "We have to help connect the dots for the consumer."

Currently the team is looking for a manufacturer, retailer, community owner or a combination interested in implementing a test-pilot. The cost will depend on the scale of the plan and additional partners may be sought to help defray the cost.

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