The Masthead

• Review of Score Cards
• New Home Sales
• Service and Customer Satisfaction
• Communities and Retail Sales
• Seller Financing
• Used Home Sales
• Insurance and Ancillary Revenue
• Profiling People Assets – how to make a good hire.
• Marketing and Pursuit.
• And much more!

One of the advantages of publishing an electronic trade journal like www.MHMSM.com (aka www.MHProNews.com) is that over time, you built a list of experts as go-to resources on key topics.  Some experts are writing columns for us monthly or periodically.  Some you can see on my LinkedIn profile, but other experts and professionals are entirely invisible, behind the scenes.

All of these expert resources, seen and unseen, bring value to you, our Industry readers.  You – our readers and experts – bring value to us, too. This is a symbiotic relationship that has considerable power and benefits all involved.

When you see a blog post or a news article on a topic such as Dodd-Frank Reality Check: What is its true impact on Manufactured Housing, I can go to a variety of resources for input.  Once published, readers and other experts will ask questions or share comments that can make for interesting ongoing dialogue and further our mutual understanding.  That in turn extends the benefits to readers and industry professionals.

Some examples of questions or comments from readers and experts will help make the point:

Question:

Will Dodd-Frank impact all manufactured housing loans?

Answer.

Not directly.  Dodd-Frank (DF) has certain triggers that will cause its regulations to apply.  Those triggers include:

• high cost loans,
• high risk loans and
• so-called exotic loans.

Question:

What if my chattel (personal property) lender does loans that not do have any of these triggers under Dodd-Frank?  Is there still an impact on their lending?

Answer:

Yes.  There are compliance costs to Dodd-Frank, as would also be true with the SAFE Act.  There are indirect impacts such as access to capital and higher capital costs.  Your lender may need to hit certain loan volume numbers in order to be profitable.

These are just some of the indirect impacts, even if your lender has no DF triggers.

One lender has told me privately that it is almost as if lenders are being treated by regulators today as an enemy.  The word is that it is getting harder and harder to make a profit.

Without profit, capital flees to where it will get a better return.

I’ll bet if I asked that question privately – are lenders being treated like an enemy by some regulations? - I’d not be surprised if many if not all in manufactured housing industry personal property lending would answer that with a resounding ‘yes.’

What is ironic is that the very regulations designed to protect consumers are going to cost consumers access to financing they had prior to such laws as Dodd-Frank or the SAFE Act.

In a number of cases, retailers and community operators would make loans to customers, perhaps through a captive finance (sister company, like GMAC is to GM) operation.  But if the cost of doing business or the risk of heavy fines becomes too great, then those lenders and their loans will tend to disappear.

Even a manufactured homeowner with good credit will be impacted by Dodd-Frank.  Consider this example.

Picture an MH owner that had A credit, and wanted to sell.  What if they had a buyer with sufficient down payment, but the buyer had a 600 credit score?   Under Dodd-Frank if not amended, that sale will not likely happen.

Who loses in the scenario above?

Arguably, everyone.  The current home owner can’t sell.  The would-be buyer can’t purchase.  The lender who would make the loan can’t do the deal.  Even an MHC owner indirectly suffers, as frustration grows when a resident wants to sell and can’t.

We must look at this issue from all perspectives, including the consumer’s viewpoint.

Yes, we can argue that Dodd-Frank will hurt our business and it will hurt home owners.

But what brought about the laws in the first place?  Why did lawmakers pass these laws?  Didn’t they have good intentions?

Let me share some thoughts that have come my way from multiple sources.

SAFE and DF were in born in part from the stated goal for ‘consumer protection.’  If MH professionals (and others who do lending) were not seen by some as ‘the enemy,’ if we were seen instead as a friend to consumers, would modifying Dodd-Frank be as difficult?

Would Dodd-Frank even exist?

The power of manufactured housing lies largely untapped today.

Manufactured homes can serve mid to upscale residential style customers.  We are also uniquely able to serve a housing price point no other type of permanent housing construction can achieve.  We are greener, safer, more energy efficient than similar sized conventional construction.  It has been proven time and again.

We can make a great case for a properly run land-lease community too.  Prospective home owners opt-in to a lifestyle that improves the quality of their life at a reduced cost of living.  One can make the case that a well run land-lease (MHC) community saves tax payers dollars.

So why do we have an image issue?

In some cases, unhappy residents.  In other cases, the endless repetition by the mainstream media of old, outdated facts or outright myths.

This is why an image/PR/marketing campaign is so important.  In every puzzle, one piece is as important as the others.

We talk about associations existing to protect and promote manufactured housing.  We need to be as involved in promotion as we are in protection!

As some have commented, we do not need to wait for an industry-wide image campaign, as nice as that might be.

Your business can do its own image campaign, as we have done for clients from border to border for many years.  These image/marketing/PR efforts can be low cost, and high impact when properly conceived and executed.  Done right, they are profitable and result in happy home owners.

The kind of home owners you could count on to contact a legislator when you need them.

One reason we have so many regulatory issues is that MH consumers are often not our ‘Raving Fans.’  They can be!  They should be!

We have the power to align our business interests with that of our customers.  We can reduce or erase existing tension where it exists. This is not theory; this is experience talking, mine or that of others.

When we have happy customers or residents, we have referrals.  That is the best kind of marketing you can get.

I often use the example of Apple to make the point.  I love my iPhone.  I am drafting this blog on my iPad.  Millions love Apple products, from iPods to Macs and more.  Why can’t we get the same type of enthusiasm for our homes and communities as Apple gets for its products?

The answer is, we can.  We have personally seen ‘angry’ residents turn into allies and promoters, if, If, IF they are properly respected and dealt with professionally!

Do not over promise.

Do not under deliver.

Do what you say you will do.  You do not have to do more, but do not do less.

Taking care of the customer, having happy customers – that is the first rule of good business.

If you need a hand at creating happy customers or more business, ask an expert.  We have plenty writing on our pages.  If you do not know who to call, please call me – perhaps I can point you in the right direction.

We are all in this together.

One thing is certain.  As we said in the last blog post, the clock is ticking.  We need to act as rapidly as possible.  Speaking for myself, I’m planning on meetings in tandem with other industry pros with legislators on key committees.

How about you? Please share your action plan.  You can share it publicly by posting on our comments, or privately by emailing me at tony@mhmsm.com.  Thanks for being part of the solution!  # #

Part of the appeal and insight from the International Networking Roundtable (and at Super Symposiums for that matter) is the presence of new factory-built model homes.

Living room in the Cavco Community Series Show Home at the International Networking Roundtable, Phoenix AZ. Note the painted ceiling and the white crown molding.

Two show homes were present in Phoenix last week, and in alphabetical order, we will present Cavco’s first. Then the New Champion’s manufactured home on display may well be ready here on my upcoming weekend blog post, so stay tuned!

Full finished drywall, with residential style entertainment center.

This Cavco manufactured home featured full finished drywall, with 9’ ceilings and transom windows.

Transom windows are seen above the energy saving glass and window treatments below.

The home shown was a 2 bedroom 1 bath, but obviously Cavco builds 3 bedroom 2 bath models, in varying lengths and widths.

Kitchen dining area is centered by dual windows that let in streams of natural light.

I’ve been walking model homes at home shows, factory shows, retail centers and communities since the early 1980s.  I confess I never get tired of it!  It is wonderful to see the residential touches that Cavco produced for this show.

Residential style entertainment center with dining area just beyond.

For example, the residential look of the entertainment center was tremendous.

The plant shelf above the entertainment center was properly displayed with well placed greenery.

Notice the plant shelf at the top of the entertainment center.

Having done many shows, I know how challenging it can be to get all the details just right. As a note for future displays, this plant shelf in the hall could have used a touch of greenery on top, to draw attention to that feature.

The plant shelf was also found in the hallway, one of those elegant touches that made the home’s appeal seem more ‘site built.’

Residential style 3/4 bath.

Unlike many homes, this one featured a ¾ bath with a walk-in shower vs. the standard tub/shower combo.  Again, the look and feel was residential.

Ample and appealing Kitchen was shown with wrapped MDF cabinetry.

The cabinetry shown in this home was a wrapped MDF.  While I didn’t inquire, I’m confident that a solid wood cabinet door is available as an upgrade.

Bill Danforth posing as if relaxing in this own living room.

Bill Danforth stayed late to accommodate my request for photos.  If I were Bill’s supervisor, I’d also commend him for being Johnny on the spot with a personalized follow up to me immediately after the show.  That is the type of attention to detail and rapid follow up that a good rep provides.   Bill’s email for details on this home is: billd@cavco.com

Covered front porch on this manufactured home community friendly designed home. The Hilton Tapatio resort is in the background, the site of the International Networking Roundtable.

While I’m pressed for time tonight, and seeking to keep this blog post brief, I would be remiss if I failed to mention again the fantastic information and presentations that were the hallmark of the International Networking Roundtable in Phoenix.  As time permits, we plan to do follow up reports on various presentations in the days ahead.

The foundation enclosure was painted to match the display model. Palm trees made for a nice backdrop!

Next stop on the www.MHMSM.com September 2010 road trip is Denver and the MHI meeting!  I hope to see many of you there. # #

Warning: This blog post is not for the faint of heart or for those who think they can skim and get it all.  As an Industry Pro, directly or indirectly, this impacts YOU every day.

In a recent conversation with George F. Allen, I mentioned a discussion topic that Finmark’s Dick Ernst and I shared in preparation for our INdustry in Focus interview with Dick about manufactured home financing.  During that conversation, Mr. Ernst used the memorable phrase, “elephants in the room.” Specifically, we spoke about the challenges that lenders and home owners face when resale time comes.  “That’s the elephant in the room, Tony, that we as an industry need to deal with.” was the gist of Dick’s revealing statement.

The president of a manufactured housing finance company and the senior VP of yet another lender I’ve recently spoken with concur.

As George and I spoke, he commented on the customer or secondary (resale) market side with, “I was going to say, you’re right, that is the second elephant in the room.  This is an important topic, Tony. Maybe you should consider doing a Linkedin or blog post on it.” GFA being correct, I agreed.  As a result of that advice, a lively Linkedin MHC group discussion has begun…

So here I am suggesting to an Industry pro like yourself that we need to take a long, hard look at how to change this avoidable and troubling dynamic.  We need a process that allows an MH customer or finance company to exit at least as easily from their manufactured home asset as someone might from a conventional stick built house.

Why?

Because as long as we have elephants in the room, those pachyderms will be pushing out of the room customers, investors, lenders, public officials and a whole host of opportunities that we otherwise would deserve!  We can be:

• Selling more homes.
• Have happier manufactured home owners.
• Get more MH referrals.
• Enjoy more, better, happier…these are some of the rewards for solving the ‘problem pachyderms’ issue!

The bottom line is you can make more money long term, and so can the Industry, once we face and fix this plaguing problem.

Yet some – perhaps many – who will read this may knee jerk in opposition.  Why?

Let’s take a look…

VMF and 21st stated in the MHI Summer Meeting with FHA officials that when they take in a repossession, they wholesale that repo 65% of the time.  Other lenders in the room were nodding or made sounds that indicated that Berkshire Hathaway affiliates are not alone.  Now they may make this ‘work,’ but at what cost? Higher rates on manufactured homes than conventional housing are certainly among the sad consequences.

Less lending availability is another avoidable consequence!

Why has the FHA set such a high bar on finance companies who will be doing FHA Title I loans?  Because of past industry losses in financing.

Why do the GSEs hesitate to lend on MH chattel, in spite of the Duty to Serve mandate from Congress?  Because of past industry losses in financing.

Why are so many MH communities doing in house financing?  To the tune of billions of dollars?  Because it is almost a necessity, due to past industry losses in financing.

Why does Ken Rishel and company teach community operators and retailers how to raise the capital and do legally compliant ‘captive chattel financing?’  Because there aren’t enough MH chattel lenders available without doing it in house.  I’d bet that Ken would also ad that because doing it in house is a profit center of it’s own…when it is done right!

Now, please don’t shoot the messenger for reporting what you already know.

The only way to deal with the elephant in the room that no one wants to touch is to look closely at the various dynamics and then do what it takes. If we as a manufactured housing professional, company or as an Industry want to climb out of the Industry’s financing limiting doldrums, we better deal with the issues head on!

When a MHIndustry lender is wholesaling off repo inventory 2 times out of 3, that means that some out there are ‘getting a good deal.’  But the ‘good deal’ to a community, retailer or wholesaler means a lender took a beating.  When the lender takes enough beatings, they may say, ENOUGH!  That leads to the skittish behavior of FHA and The GSEs on this subject.  Those losses on repos cause other financial institutions and potential lenders to look warily at the manufactured housing product, because Conseco/Greentree is not ancient history to them.

Now please don’t misread this.

For example, the government agencies have Congressional mandates.  They should serve manufactured housing as the law requires, period, end of story!  In my world and yours, if Congress passes a law, we obey. If you don’t like it, you work to change it. But if you and I simply fail to obey a law, then we get fined, prosecuted, jailed, or strung up.  I say, the GSEs and FHA should do as Congress mandated.  They should do so broadly, rapidly and effectively.   These agencies should find the solution to the elephants in the room issue as part of the implementation of the legislation that Congress created and the president signed into law.

This means that the FHA and the GSEs should find a way to make the programs sustainable and work long term.

We in the Industry, if we are smart, should help them.

That is what MHI and those Industry leaders were trying to do in DC a few weeks ago, trying to shed light with Vicki Bott and other FHA and HUD officials on ways to make their program work.  Because a sustainable program is a win for everyone!

But let’s go back to those who can’t resist doing that wholesale deal on a repo.

And let’s go back to those lenders who shed their inventory at bargain basement rates.

Knowingly or not, each are contributing to the long term history in the financing/resale realm that has plagued our Industry, those elephants in the room.

Before writing this, I also spoke with a wholesale repo buyer, who effectively said:

“If they are going to sell me a home at these prices, why would I say no?”

I admit, that has to be tempting.  But a number of points come up in analyzing this long term, and you can think of them as well or better than I.

Now, please note, the wholesale buyer has learned how to move that inventory.  So why can’t the lender do the same?

I spoke with a long term MH lender, who effectively said:

“I have x homes and x millions tied up in inventory in just the x market.  The regulators are checking our files right now.  We want to continue to do MH lending.  But every time a ‘park’ (his term) bills me for lot rent, every time a park fails to help resell a home at retail, every time a home sits and sits instead of resells for a good price, every time I have to move a home in order to get it sold, it puts that much more pressure on our manufactured home financing program.”

Do we need to lose another lender(s) before we learn our lesson?  Hello?  If we are the ‘survivors’ of the Great MH Lending Meltdown that started around the turn of the century, who needs coffee?

Now all of these are actual or paraphrased comments from real people who didn’t ask to be named for obvious reasons, and each one is revealing.

To the future potential of the MHIndustry, these viewpoints and their implications are chilling.

Let’s imagine for a moment, that FHFA, in the aftermath of the tidal wave of comments they received last month, relented.  Let’s say they put a program in place that really met the intent of Congress in the Duty to Serve legislative provisions.  Let’s further imagine that FHA modified their threshold for Title I lenders, lowering the amount and making more capital thereby available to the Industry.

Then let’s image that nothing has changed about the resale/remarketing issue.  What would eventually happen?

They’d take their lumps for a while, then go back to Congress and understandably say, “we told you so!”

So now ladies and gents, we better tackle this once and for all.  We should not only work on Congress and these agencies to get the financing we need, but also work with them to make sure that repos don’t result in big losses.

That is just long term, common sense.

That said, one gent told me recently that in our Industry long term may be 10 minutes to 10 days.  “I’ve got the end of the month coming up, and have to get this deal done!”  Oye, vez.  We have to think 10 weeks, 10 months and 10 years ahead too.  A dozen years have gone by since we sank from nearly 373,000 shipments to under 50,000 last year.  We are inching up this year, and that is good.  It reminds us that we can grow again.  But if we don’t buckle down and do ALL that it takes, we will have a shorter and shallower bubble than we had in the roaring 90s.

Or, we can have the best years the Industry has ever had.  The choice is in our hands.

Let us shift gears and briefly look at an example that may lead to a solution.

Back in the late 80s (and again in the early 2000s), I was in a leadership role of  a successful resale programs for various manufactured housing lenders.  We:

• set up a structured approach that reduced their losses, accelerated their resale time line and got assets back on the books at prices that were close to new ‘repo fighter’ home prices then.
• There were legal and systemic limits that kept us from selling repos for even more, but I am here to say, we could have sold those homes for more money had the financing system allowed for it.
• We didn’t buy repos ourselves, meaning we didn’t compete against the lenders repos with our own inventory, as to me that seemed like a conflict of interest.
• Our team did repo sales for lenders, period!  We got paid commissions, and we earned a lot of those.  We also received got paid some spiffs and other incentives, all above board, that were part of our agreement.
• We looked at issues and we dealt with them in the best fashion possible to control costs for lenders and limit their losses.

Late 80s MH Industry Article collage, recounted results helping lenders save money on repos.

It wasn’t perfect, but it worked a lot better for those MH lender clients than they had elsewhere in that state.  We know this because they said so, and backed it up by bringing us ever increasing levels of inventory, and then asked us to expand into different markets in other states.

Foremost Insurance Kudos Letter to our Repo Retail Center

That was then.  Maybe there are similar efforts out there now, but:

• where are they now?
• If they are out there, why are key MHIndustry lenders still wholesaling 65% of the time?
• If they aren’t out there, why aren’t MHIndustry lenders creating a program that works for all long term?

Ladies and gents, this isn’t rocket science. This is about discipline, solution orientation and will power.  Other industries face this issue and make it work.

We…

Can…

Too!

I don’t quote sources unless they wish or agree to be quoted or have spoken in public.  So  privately to me or via posted comments, I am hereby inviting industry members to comment on the elephants in the room.

Please share your experiences and viewpoints.  Please agree or disagree.

Heck, let’s have a debate here if you want to, that is what posted comments are for too.

We as MH professionals, companies and as an Industry have to move the resale/re-marketing subject ahead.

We don’t need endless meetings and another task force that later disbands, for whatever reasons.  I am not criticizing anyone, but I am challenging every stake holder to think this through and resolve it for the long term benefit of all involved.

Some MHCommunity operators do a good job at this.  If they can, others can too.

How do you solve a big problem?  You face it squarely and deal with it honestly.

How do you eat an elephant?  One proverbial bite at a time. # #

_________

End Note:

A few The Masthead blog posts ago, I touched on this topic lightly.  It was part of the broader subject of what are our Industry’s strengths and weaknesses are.  That post referenced how we could be doing 200,000 to 800,000+ new annual manufactured home shipments a year!  Not someday, right now. If you missed that prior post due to vacations or whatever, you might want to read or re-read it.

I was thinking back to the repo glut of the late 90′s and early 2000′s.

• Do we miss selling 372,000+ homes a year?
• Do we miss having full communities?
• Do we miss building new MHCs or fee simple developments?
• Do we want factories that are at or near capacity?
• Do we miss having more retailers?
• Do we miss more lenders, vendors…

Please read, or re-read this blog post linked below.  It outlines the path for MHIndustry  business growth today.

http://www.mhmarketingsalesmanagement.com/blogs/tonykovach/manufactured-housing-industry-growth-potential/ # #

_________

L.A. ‘Tony’ Kovach, MHM

Publisher, MH Marketer and The Masthead blogger

Manufactured Home Marketing Sales Management trade journal at www.MHMarketingSalesManagement.com aka www.MHMSM.com

tony@mhmsm.com

847-730-3692

We are seeing signs of an uptick in Industry home shipments, as reported by the Manufactured Housing Institute (MHI) in recent months. What is the potential of the Manufactured Housing Industry today? What are the factors holding back the sales of manufactured homes? Let us take a brief survey of this timely and important topic.

In the upper Midwest area of Chicago where I am based, new manufactured housing costs tends to be about 40% or so below the price of new conventional construction that is similar in size. While the percentage of savings may vary from region to region, perhaps with lower savings in the South, higher savings in the North, we know that generally factory building can produce quality while saving money. Let’s imagine we had a cell phone called the xPhone that looked like and performed like an Apple iPhone, but was 40% lower in cost. One might imagine that the market potential for that product would be huge.

So applying that analogy to the manufactured housing industry, what are the elements or factors that support our growth, and what are the items that hinder our growth?

Industry Growth Factors include, but are not limited to:

• aging housing stock in much of the U.S.
• ever growing U.S. population
• high cost of conventional housing construction
• declining incomes
• growing population of retirees, limited fixed incomes
• the perception that Earth’s resources are limited or dwindling, and that greener more sustainable designs and building processes make good economic and public policy sense.

Hindering the manufactured housing Industry’s growth factors include, but are not limited to:

• remarketing, resale of homes; the lack of a strong resale mechanism that mirrors the real estate market hurts hampers every aspect of our Industry; starting with financing
• the appreciation vs depreciation issue
• the image issue (some of this is due to older ‘mobile home parks’ with old pre-HUD Code mobile homes, but other factors contribute, such as the media, lack of PR/remarketing, etc.)
• lack of a broad based marketing, educational, image building outreach to Americans and public officials; while a national GO RVing style campaign that worked so well for the recreational vehicle industry has been spoken about many times, it has never gone beyond the discussion stage in the manufactured housing industry as a whole
• financing and regulatory challenges
• a wide variety of skill sets among industry professionals, from companies who do a solid job of personnel development, motivation and training, to firms where the lack of same is dismal and apparent.

These lists could go on. But the point is this; the start of any growth program is candidly identifying the issues, and then just as honestly and aggressively addressing them!

The half a loaf is better than none approach has always made sense to me. Some states or area associations have done videos to promote the manufactured home lifestyle. One effort that has drawn attention and results is linked below:

We need more companies that will do, individually or in tandem with others, their own marketing and educational campaigns. We need more associations and organizations, individually or in unison with others, working to tap the incredible potential of the factory built housing world. We need some action, vs. more talk.

What is our industry’s potential?

On pages 107 – 108 of the new book, The Manufactured Housing Revolution, we see a common sense process that could grow sales to 229,600 HUD Code homes per year, to higher end range of 816,060 homes per year! That top number would represent an industry record year.

What are you willing to do to make those numbers a reality? It is your future. Let us work smarter to make that future brighter and more profitable. # #

L.A. ‘Tony’ Kovach, MHM
Manufactured Home Marketing Sales Management trade journal at www.MHMarketingSalesManagement.com aka www.MHMSM.com
tony@mhmsm.com
847-730-3692

This will be a lengthy report, so let’s do a quick executive summary of the points to be covered:

1. FHFA Comments follow up.
2. Congressman Walter Jones review
3. MHI Summer Meeting Report on the Washington, D.C. Finance Meeting with Gov’t Officials and Industry Players.  This may be the most important depth – eye witness – report on this topic you will find.

With those points made, let’s get started.

1. FHFA Comments follow up.

Let’s begin today with a brief note of thanks to all who sent messages last week to FHFA and to your Congressional representative and Senators.  What is the outcome?  Time will tell, but let me share what is known at this point.

As of 4:52 AM on 7/28/2010, there are exactly 140 posted comments on the Enterprise Duty to Serve Underserved Markets (75 FR 32099) Notice of Proposed Rulemaking.  As their site shows, these are comments posted to 7/20/2010.  By 1:47 PM on 7?28/2010 those numbers had grown to 216.  All of these results were for comemnts sent to 7/20/2010.  Here we are 8 days later, and there were 2 more days of comments.  What happened those last few days before the comments cutoff?

We hope to verify this soon, but one reliable source tells us that ‘thousands’ responded to this industry wide call for action! We are also told that the FHFA’s system of online reporting got swamped and they couldn’t keep up with posting the follow-up messages from good people like YOU who want real Financing for the MH Industry!  If that report is accurate, that could lead to good news indeed for all involved.   Learn more here at MHMSM.com as the facts develop.

Presuming this report is accurate, that means that many Industry professionals – and customers of our industry?! – took the time and effort to make the needs known loud and clear in Washington, D.C..

This effort ‘started’ publicly with a call from MHARR, followed by a series of ‘call to action’ messages from MHI, all of which were reported here in complete detail at MHMSM.com.

Many state associations, individuals and businesses had their own initiatives to ‘rally comments for financing’ – I’d like to note Greg O’Berry from Hometown America and also Ken Rishel of Precision Financial/Chattel Finance News for their respective efforts.  Our team and I at MHMSM.com personally took to the time to write, and many of us made group and individual efforts to encourage our circles of influence to act.  The bottom line is, that if this effort indeed rallied ‘thousands’ of comments, there are many, many leaders who can share in the credit for this accomplishment.

All of this was covered and encouraged right here at your pro-Industry media source, MHMSM.com, in podcasts and in writing online.

So while this is still a work in progress, the government offices are bound to have taken note of this outpouring during an election year.  Those on Capital Hill likely got a similar message.  Government action is rarely an overnight event, but all of this brooks well for enhanced financing options for our Industry in the months ahead.

We at MHMSM.com will keep you abreast of all these events and others that are taking place in our Industry.

To all who picked up phones, sent comments and messages, contacted FHFA/Congress/Senators, kudos and thanks!  I am confident such efforts help make a difference.  Hats off!!  :-)

As a closing thought, while the comments period has closed, there is absolutely nothing to keep those who haven’t written in from doing so.  While they are not ‘official’ comments, they are still comments that will be noted by FHFA officials.  I’d also strongly encourage all those who haven’t written their Congressional representative and Senators to do so.  There is no time limit on contacting them.  The more they hear from the rank and file to management up to the executive suites of our Industry, the more likely we are going to get the financing we need and deserve.  Sound off.

Here is a link to contact your congressional representative and Senators.

2.

Congressman Walter Jones review

In last week’s exclusive Industry In Focus interview, the Honorable Congressman Walter Jones made many important points about the Safe Act, financing, his positive impressions of manufactured housing today and more.  One of those more items was his clear message to encourage the very types of engaged efforts we just reported to you above.  “Educate and Engage” might have been one summary from this interview, it is worth your time to revisit this and share the link with those in your circle of influence.

Link to Congressman Jones Industry In Focus Report:

http://www.mhmarketingsalesmanagement.com/blogs/industryvoices/an-mhmsm-com-industry-in-focus-interview-report-with-the-honorable-congressman-walter-jones-r-nc3/

3.

Financial Summit, Part 2, held at MHI Summer Meeting.

Finance_Summit_at_MHI_Summer_Meeting_2010-07

3. MHI Summer Meeting Report on the Washington, D.C. Finance Meeting with Gov’t Officials and Industry Players

After the Elkhart IN meeting last June 2, 2010, many voices in the Industry opined that the Congressman Joe Donnelly backed finance initiative was a start, but needed much more work.  Many called for a follow up to get deeper into the nitty gritty of the various issues.

That nitty gritty follow up took place Thursday, July 15 as the last – and key component – of the MHI Summer Meeting in Washington, DC’s L’Enfant Hotel.

The Financial Summit, Part 2 meeting was an hour and 47 minutes of discussions with officials from government agencies representing the FHFA and HUD, and industry leaders from lending, manufacturing, land lease community operations who are doing in house chattel financing, retailing and MHI staff. As an MHI member, I was invited for  MHMSM.com, so that you could get the feel for this critical confab provided below.

It is not my intention to parse this meeting or ‘rate it.’  I do want to commend all who made this happen, as the need is clearly great and because the lag time between the June 2 Elkhart MH Financial Summit and this meeting was relatively short.

What will follow are refinements from notes taken regarding points discussed.  This will flow as the meeting itself flowed, so you will have more of a ring side seat to what took place.  As the meeting lasted close to 2 hours, a long narrative follows.

Vicki Bott and Dick Ernst at Finance_Summit_at_MHI_Summer_Meeting_2010-07

Vicki B. Bott, Deputy Assistant Secretary HUD sat at the ‘head’ of the rectangular configuration of tables, along side Finmark Marketing Associates’ Richard “Dick” Ernst.

Ernst reminded all that the parties were not meeting with any intent or purpose to violate anti-trust laws.

The meeting, I’m told, was requested by David H. Stevens, Assistant Secretary for Housing and Commissioner for FHFA.  I’d like to note here my thanks to Ken Rishel, who provided a number of his own insights about the event, which he attended.

MHI_Summer_Meeting_-_Finance_Summit_with_Gov't_and_Industry_leaders_-_2010-07

After that introduction, the discussion rapidly moved to specifics about how industry lenders and manufactured housing land lease community operators handle repossessions, obviously with the idea of helping the FHFA craft a program that will yield long term loan performance.

The first specifics discussed included such points as:

1. Selling an asset (manufactured home in repossession) wholesale vs. retail.
2. What are the real loses per unit sold
3. How an issuer needs assets
4. How does chattel move through the pipeline from repossession to resale?  How difficult, intensive and expensive is it?

A FHFA official asked, what can make the loan more secure? More down payment?

The reply came back that it is ‘the survivors who are in the room.’ The problems of the past were caused by people who are gone, the bad apples have left.  Then the statement reply was completed with the notion that of course, down payment does matter.

Another industry veteran pointed out the importance of staying on top of (collections), and that they viewed their collectors as truly being ‘financial counselors.’ It was a proven fact that rapid and early intervention by such counselors could keep a loan from going into default.

Anyone below a 580 credit score is 10% down.  Another voice concurred, “I would endorse that call.” In addition, the statement was made that they should add 100 to 125 basis points to their loans, as it is that service intensive.

Loss mitigation was the next topic.

Financial_Summit,_MHI__Summer_Mtg_2010-07-all photos by Tony Kovach

Put the onus on lenders immediately. The earlier you catch it, the more successful you are going to be (meaning, at catching and saving a delinquency). Treat Title II and Title I  clients the same as conventional mortgage customers.

For loans underwritten at Triad Financial, 100% phone audits are done on all closings.  In addition, there is another 15% random audits by an outside contractor.

The statement was made the one should never get away from “full docs.”  “We did that 10 years ago,” while the conventional housing mortgage industry moved away from that, in what was part of the problem in the recent mortgage/banking crisis for stick built homes.

The question was asked by HUD’s Bott, “What is the most typical fraud?” The reply, was “Falsified down payments and undisclosed buy fors.” What is a buy for?  When a relative or friend makes the loan for a third person, came the answer, and you wouldn’t see that on Title II. The implication was that it could occur on Title I lending, if caution and preventative steps aren’t in place.

Verifications are permanent, debt to income.  620 score on Title II.  There is plenty of data to share so we can all know what performs at what level.

Paul Nichols with Vanderbilt Mortgage and Finance said, ‘We’ve got good rate on Title I loans.’

Another voice commented that the down payment assistance on Title II allowed them to pull out data (on performance).

DTI (debt to income) are straight per ‘the regs.’ The comment was made that ‘Rural placement impacts loss severity.’ Bott with HUD was asked, do you look at data that way? How does USDA portfolio stack up?  Vicki said that the USDA performs better.

This was followed by an observation that loans should be compared ‘rural to rural and urban to urban, when making comparisons and measuring loss severity.

Assure is it location vs. property type.  Compare down payment vs. delinquency rate, and credit scores vs delinquency rates, for example 580s vs. 620s.

The statement was made that USDA program (overall) has a lower level of delinquency than FHFA – even though there is no min credit score USDA, and you can roll in the closing costs.

Finance_Summit_at_MHI__Summer_Meeting_2010-07

Greg O’Berry from Hometown America said that manufactured housing land lease community operators are  “Not afraid of  the issues.” The reason for this is because, we are “Very close to our customers when they go delinquent.” In their program, they only make fixed rate loans.  They have a 580 credit score cut off.

O’Berry also said they are licensed  under the Safe Act, have a portfolio of 250M in loans, with some 5000 loans outstanding.

Lois Starkey - right - with HUD's Liz Cocke, who has 3 copies of the new MHMSM.com book, the Manufactured Housing Revolution.

Some of the elements of underwriting included:

• Centralized underwriting functions
• Loan origination outsourced
• People on site fill out ap – send the ap – self service

Financial_Summit,_MHI__Summer_Mtg_2010-07

David Lentz from American Land Lease (Green Courte Partners) stated they used an outsource servicer, they are a community owner and lender too.  One key noted was to get involved on the delinquency early and to monitor the collateral closely, which is readily done in a manufactured home land lease community setting.

Kevin Clayton stated that they had ‘no incentive to move to a particular lender.’

Tim Williams with 21^st Mortgage stated that when “Repo time,” came, people “generally abandon house.” Once they are “60 days behind, they walk away…Our debtor has moved on, found another place to live, because they couldn’t keep house.”

The question was asked, how long does the foreclosure cycle take?

The reply was, in some states faster, in others slower.

Average delinquency 60 days on repos, with loss mitigation being doable in a manufactured housing community. There is no 12-18 months to obtain your collateral in the MH industry, as compared to what might take place with conventional housing and mortgages.

What causes are the typical causes for repossessions?

David Lentz: “Just know, you just know, personal: divorce, job loss, etc.” Knowing what is happening in your community helps mitigate losses.

Another observed that when you lend to lower standards, those lending their own dollars have a definable risk.

Lending can contain or mitigate risk, higher frequency of repo, but good loss mitigation

Keeps it significantly less expensive.

FHFA should allow, if possible, to keep the home on its current site.

Greg O’Berry said that at Hometown America, a repo resold and was income generating again generally within 6 months.

Vicki Bott: ‘So it is more like a condo, it depends on how well community operates…’ to which David Lentz replied, “It is our product.”

The tongue in cheek statement was mad that the trends were stable for those in the room without “Berkshire Hathaway money,” which was met with a warm round of laughter.

Dick Ernst:  Private investors and community banks, like 680 to 700 scores.

But the heart of our industry’s business is the 620-680 customer.  That risk can still be managed. “This is where FHFA can help.”

Bott replied: FHA wants some of the TOP part, not just the bottom, of the credit profile.  They want the bell curved shared shared out FHA Title I loans.

Paul Nichols with Vanderbilt stated that, “Tim (Williams, 21^st Mortage) and I are full spectrum credit buyers, buy it right, price it right. 100% recourse.’

The comment was made that on private property setting, that the “private site cert is an aggravation for retailers, and ads no value at all.”

The observation was made that on the retailing side, home centers get customers – Title I and GNMA – offers great interest rate, sales center reps go to that of course.

Raising loan limits (on Title I) helped.  Parts of program don’t help customer of performance.  It was noted that:

• Get opposite of adverse selection.
• Get a building  permit – good proof.

Limit on land home for Title I were still an issue.  Land & site with only $20,000 for the property and improvements usually meant it wasn’t as desirable a site, since you could easily invest 10-15k for a well and septic.

Financial_Summit_MHI_Summer_Mtg._2010-07

Kevin Clayton noted that many customers want 5/12 roof pitch and such aesthetics.

Another pointed out that most retailers are survivors too.  They tended to be strict, work with better customers, went for the best financing, the simplest loan, lower rates and stay away from “onerous stuff.”

Joseph H. Stegmayer, the Chairman, President and Chief Executive Officer of Cavco Industries, Inc. said that it was important to service the home after the sale.

The ‘Manufacturers must stand behind product, that’s beneficial to consumer and lender, and it has actually occurred, that’s not a marketing pitch.’

A number of rapid and generic observations followed from various participants.  Among them were:

• Conventional financing?  There is no mortgage insurance.
• If you make a request for bottom 25% that is what you will get.
• Appraisals require 2 Manufactured home (comps), but the lender may layer on requirements beyond (gov’t) minimums.
• Manufactured home values were a topic, with a lender stating that “As bank, I’m getting resistance to appraisals.”
• Title II with good customers could get appraisals.
• Under Title I, the “Advance calculation method works pretty well.”
• One issue in rural settings was getting 3 comps.  Even if you get them, in the country, you may have one property with ½ acre while another has 25 acres.

Vanderbilt and 21^st Mortgage observed that when it came to dealing with repossessions, they typically wholesale.  They have a list of buyers, website, marketing group, hot list of community owners and retailers. Park owners tend to buy the homes, which are often in a land lease community already.

While you may be able to sell a repossession for more at retail, when you sell it where it sits, what you do is the math.

An example was given where a home would wholesale for $35,000.  The same home might retail for $50,000, but if it costs you $15,000 to get it ready, plus the time, hassles and unknowns, you as a lender may be better of wholesaling the home.

Another point was made that the quality of customer is better for retail vs. wholesale.

Bart Mize, with 21st Mortgage, stated that a common ratio might be to wholesale 65% vs. 35% retailed.  The cost to physically pick up a repossessions was a factor, when $1000 might be allowed for moving, while the actual cost could more like $3000-$4000.

The observation was made that the last thing you (FHA) need is undisciplined lender.  Wholesaling is a known risk, retailing had more variables and thus was a greater potential risk in handling a repossession.

Bidder buys as is where is, given a 10% commission when retailing it.  The ‘numbers tell you what path to take,’ be it wholesale or retail.

In discussing scenarios, the requirement for the program as proposed of $10 million dollars plus an additional 10% ‘Is an over-reach.’

In discussing how credit files are viewed, some of the following points were made:

• Medical collections, let those go.
• “Thin files” – credit files with not enough to trigger some FICO, tended to perform reasonable well, better than loans with scores under 600.
• 7-10% of loans have no credit score.  Have some credit, but not enough to generate a score.
• On such files, they often asked for more than 5% DP, depending on job time.
• Typically lend to those with some type of credit history.

Regarding titling, the statement was made that they should just do title work in house, educate title contract issues.  There was some interest in the idea of coming up with a national titling department, with the suggestion of ‘working with Thayer (Long of MHI) on the claim side.’

The meeting drew to a close with a number of general comments, such as:

• comments about using online systems for appraisals,
• the use of the NADA book in given scenarios
• Land Home’s Tony Wicke saying that it may take 1 to 5 weeks for ‘FHA to get out there.’
• 21^st and VMF noted that some areas have no appraisals for home, lenders input good , use NADA book value in a timely fashion
• Inspection delays could be addressed with online systems, getting a copy of data plate or HUD # which is ‘pretty fool proof, and doing what we do on conventional side.’

Vicki Bott thanked everyone for attending, as they were ‘about out of time.’ # #

L. A. ‘Tony’ Kovach

www.MHMarketingSalesManagement.com or www.MHMSM.com

tony@mhmsm.com

847-730-3692

A letter came to my attention that was circulated via email. The letter which follows my introduction here addresses the growing concern over HUD’s ‘handling’ of the Manufactured Housing Consensus Committee, or MHCC. The MHCC is a critical body from the Industry’s perspective. The MHCC exists to protect the interests of both the Industry and the public, while providing safeguards for all concerned. If you are in the Industry, the MHCC is important to you!

Sadly, too many in the HUD Code Industry fail to recognize the importance role that the MHCC is intended to play. So as you dig into this topic with me, you’ll see that indeed “storm clouds are gathering” over the MHCC and HUD officials’ recent actions regarding the MHCC is an import issue! The Manufactured Home Industry obviously needs Manufactured Homes that are appealing, durable, well designed, safe and affordable. The MHCC was designed to play a key role in that process.

In the memo that follows this introduction below, the concerns are being expressed by officials at MHARR, one of the two national Industry trade organizations. Certainly the concerns are also true among members of the MHCC and others in the HUD Code Home Industry regarding the ‘handling’ of the MHCC by HUD.

To put it bluntly, many believe that some at HUD are trying to neuter the MHCC, and strip it of its legally established status ‘check valve’ status.

The MHCC was established by the Manufactured Housing Improvement Act of 2000 (MHIA 2000), so it has a legal status. The MHCC exists as a check point to keep HUD, the federal government or other forces from arbitrarily imposing their will upon the Manufactured Housing Industry, notably in the construction of homes and construction-related regulations.

Regarding the MHCC, the MHIA of 2000 says in part:

‘‘(3) CONSENSUS COMMITTEE.—
‘‘(A) PURPOSE.—There is established a committee to be known as the ‘consensus committee’, which shall, in accordance with this title—
‘‘(i) provide periodic recommendations to the (HUD) Secretary to adopt, revise, and interpret the Federal
manufactured housing construction and safety standards in accordance with this subsection;
‘‘(ii) provide periodic recommendations to the Secretary to adopt, revise, and interpret the procedural and enforcement regulations, including regulations specifying the permissible scope and conduct of monitoring in accordance with subsection (b);
‘‘(iii) be organized and carry out its business in a manner that guarantees a fair opportunity for the
expression and consideration of various positions and for public participation; and
‘‘(iv) be deemed to be an advisory committee not composed of Federal employees.”
(Note: the parenthetical addition of the word HUD – short for Dept of Housing and Urban Development – used above was added for clarity).
In fact, this might be an appropriate place to share the purpose of the Manufactured Housing Improvement Act of 2000 or MHIA of 2000, which Congress passed and the president signed into law. Here it is:
SEC. 602. FINDINGS AND PURPOSES.
‘‘(b) PURPOSES.—The purposes of this title are—

‘‘(1) to protect the quality, durability, safety, and affordability
of manufactured homes;

‘‘(2) to facilitate the availability of affordable manufactured
homes and to increase homeownership for all Americans;

‘‘(3) to provide for the establishment of practical, uniform,
and, to the extent possible, performance-based Federal construction
standards for manufactured homes;

‘‘(4) to encourage innovative and cost-effective construction
techniques for manufactured homes;

‘‘(5) to protect residents of manufactured homes with
respect to personal injuries and the amount of insurance costs
and property damages in manufactured housing, consistent
with the other purposes of this section;

‘‘(6) to establish a balanced consensus process for the
development, revision, and interpretation of Federal construction
and safety standards for manufactured homes and related
regulations for the enforcement of such standards;

‘‘(7) to ensure uniform and effective enforcement of Federal
construction and safety standards for manufactured homes;
and

‘‘(8) to ensure that the public interest in, and need for,
affordable manufactured housing is duly considered in all determinations
relating to the Federal standards and their enforcement.’’
(Note: bold lettering above added for emphasis).
For those of you who are ready to read the entire MHIA of 2000, we have posted the entire Act at this link,

http://mhmsm.com/downloads/Manufactured_Housing_Improvement_Act_of_2000.pdf

with the Manufactured Housing Improvement Act of 2000 found starting on page 55.

We are a pro-Industry publication. We are here to provide news and views you can use. We’ve often stated – and will restate again – the fact that www.MHMarketingSalesManagement.com as an Industry Trade publication is neutral and doesn’t ‘parse’ or attempt to analyze who says what among trade organizations, etc..

www.MHMSM.com does from time to time, point out the well known fact that there are differences in the reporting between national associations or others in the industry, a point made in my article in the May issue on the MHCC’s April 2010 meeting in Tulsa, OK.

In researching the memo below and asking HUD, industry leaders and others to share their perspectives on this, it should be noted that no one stepped forward to speak ‘on the record.’ Yet virtually everyone I contacted had something to say off the record! Now that fact is in itself is telling, because here in America, we should feel comfortable and safe sharing our candid views that are stated intelligently, respectfully and without histrionics or hyperbole.  We call that ‘freedom of speech!’

One of the comments that came in to me off the record while researching this article below is quoted extensively here:
“I want to begin by thanking Danny Ghorbani for sharing the information on the recent MHCC meeting in Tulsa with the public. Shortly before the meeting, MHCC members were informed that certain governmental bodies had found that the MHCC is a Federal Advisory Committee and, as such, must follow the Federal Advisory Committee Act (FACA). Due to this ruling, HUD:

• Re-wrote the MHCC Bylaws. In the past, the MHCC re-wrote the Bylaws and voted to accept, reject or amend them with HUD’s final approval. Under FACA, HUD writes and approves the MHCC Bylaws.
• Decided during the Tulsa MHCC meeting that certain non-committee members were allowed to speak, while others were not, an action which shocked many of us, but HUD is now in charge of the meetings.
• Dissolved the MHCC Planning & Prioritization Subcommittee, which is a very critical action. This subcommittee received all proposed changes to the manufactured housing standards of construction, and assigned each a priority and to a specific subcommittee to develop a recommendation for the full MHCC’s action.
• Totally took over the function of developing an agenda for the meeting, down to which specific items would be discussed by each subcommittee during their meetings. In the past, the chair would ask subcommittee chairs how much time they wanted scheduled for their meetings and try to accommodate them. We would also try not to schedule the subcommittee meetings concurrently so a person could be an active member of more than one subcommittee. The Chair of the Subcommittee then set the agenda according to the priorities and other actions subcommittee members wanted to discuss.
• Personally, I also disagree with the decision by HUD and/or the current administration in Washington, DC regarding lobbyists serving on federal committees. According to HUD, if a person is a registered lobbyist (and many of the employees of national and state organizations are lobbyists), they cannot serve on the MHCC. I believe that in many cases, these employees of state and national organizations are excellent candidates for the MHCC. Often they represent various segments of the industry and speak with a variety of industry members over time. In most cases, they would certainly be better candidates for MHCC positions than someone who has never been in a manufactured home before (and this has happened).

I believe this change in how the MHCC is controlled by HUD is something which must be brought before Congress. I do not believe it can be repaired at any lower level.”

It should be noted that industry voices tell me that it is doubtful at least that Congress intended the Federal Advisory Committee Act (FACA) to apply to the MHCC, nor was the interpretation used from the outset of the functioning of the MHCC.

To rephrase that, applying the FACA to the MHCC is a recent and novel approach by HUD towards this Industry and public representative body.

What I’d like to urge Industry readers is to get into the meat of this issue, and then communicate your perspective to MHI, MHARR and directly to HUD on how you see the handling of the MHCC.

I’d point out that Danny Ghorbani and MHARR themselves are suggesting that this issue can and should be addressed by the Industry – and he mentions both MHI and MHARR as representing Industry interests – with HUD first.

Most of my sources tell me that this is an issue that won’t go away; in fact it will continue to heat up in the days ahead. So the storm clouds gather, because the MHCC plays a vital and often misunderstood or under appreciated role in our Industry.

MHARR often sends us news items, as does MHI. We post both organizations’ news routinely, and both get widely read on our Ezine. This particular item below came to me from a third party, and NOT from MHARR directly.

Against this backdrop, let me share the unedited letter below which sparked this research, as it relates to this topic of the MHCC and HUD’s recent actions.

============= start of MHARR letter ============

Ms. Susan Brenton, MHCC Chair
Mr. Bill Lagano, MHCC Vice Chair

Dear Susan and Bill:

I am writing to follow-up on the significant response that we have received regarding the April 2010 MHCC meeting in Tulsa, Oklahoma.

As you both know first-hand and, unfortunately, had to endure, what occurred at this meeting was outrageous and should be unacceptable to all federal program stakeholders. Nor should it be tolerated, either by the leadership of the Committee or by Committee members who should be committed to the role, authority, functionality and independence of the MHCC.

We understand, for example, that as the MHCC Chair, you were barred from even recognizing MHARR’s representative for a question or comment, while Department employees, consultants, contractors and other special interests were allowed to speak based on the formality of a “request” by a Committee. This is censorship that undermines the Committee’s access to the collective experience, knowledge, expertise and institutional memory of the regulated party that has been painstakingly accumulated in the nation’s capital over the course of four decades, and that is simply not available from any other source. In addition, it deprives Committee members of essential information relevant to their deliberations and votes on issues that are crucial to the industry and consumers.

Because this is discriminatory and arbitrary, and because it leaves important facts and perspectives off the table, we are surprised that Committee members did not openly oppose — and challenge — these rulings. We recognize, however, that the format of the meetings does not lend itself to such challenges. We also understand the frustration that has been conveyed to us by various Committee members.

Indeed, many program stakeholders are now beginning to recognize the importance of having the collective representation of the program’s regulated parties (i.e., the industry and particularly manufacturers) on the Committee as voting members, given their institutional memory, knowledge and expertise regarding the complex issues that the MHCC must regularly face. Unfortunately, the quick acquiescence of our sister association (MHI) in this exclusion of collective industry representatives, provided a ready excuse for the prior program management to eliminate MHARR from the Committee as well, under the guise of compliance with a White House “preference” to bar registered lobbyists from service on federal advisory committees. A recent MHARR analysis of this “guidance” however, reveals that it was overstated by the prior program management and that collective industry representation on the MHCC should be restored in order to balance input to the Committee from regulators, contractors, consultants and special interests, as was on display at the Tulsa meeting.

As it is, we trust that the MHCC’s Tulsa meeting was planned and conducted under the auspices of the previous program management, as it was clearly influenced by the policies and decisions of that management over the past several years. Hopefully, the new program leadership at HUD will take major steps to fully comply with section 602(b)(6) of the law — maintaining and advancing this centerpiece reform of the 2000 law going forward — as restoration of the role, authority, functionality and independence of the MHCC should be and remain a top priority for the industry, consumers and all program stakeholders.

MHARR continues to thank both of you for your hard work on the Committee and your patience under difficult circumstances.

Danny

cc: Ms. Teresa Payne
HUD Code Manufacturers
MHCC Members
Danny D. Ghorbani
President
Manufactured Housing Association for Regulatory Reform
1331 Pennsylvania Ave. N.W. Suite 508
Washington, D.C. 20004
Phone: 202/783-4087
Fax: 202/783-4075
Email: DANNYGHORBANI@AOL.COM