PROS & CONS, & NOT MUCH ELSE!
PROS & CONS, & NOT MUCH ELSE!
Well attended, lousy room; common focus, many tangents; informative start, weak ending
60 executives from business, government, and federal regulatory agencies – but NO GSEs, gathered, 2 June 2010, in the second story , acoustically challenged, stuffy Athenian Ballroom of a 100 year old downtown Elkhart, Indiana, building . They’d flown in the night before from as far afield as Colorado, Washington, DC. and Florida. Better the next meeting (None was announced, or even hinted at, hence an indication of interest and effectiveness right there!) be held at the RV/MH Heritage Foundation’s mall of Fame, museum and library facility (also) in Elkhart, Indiana.
Originally described as a Manufactured Housing Finance Roundtable, by the time we arrived, it’d been relabeled a Manufactured Housing Summit. Small difference perhaps, but predictive of how difficult it was to keep everyone on point (MHFinance), with so many disparate aspects to and of the subject. And Yes, there was an agenda; but once the group got past Welcome & Introductions (Really weren’t many, just the meeting hosts. Maybe next time they’ll go ‘round the room’, to facilitate networking and participation), and Manufactured Housing Institute’s excellent ‘State of the MHIndustry’ Power Point presentation, the remainder of the morning was a round robin discussion of real estate and personal property -secured lending, as they pertained to manufactured housing.*1
What transpired at this morning meeting? Well, as to substance, I’m going to leave that to folk who garnered the most attention, by design, at this roundtable/summit: Federal Housing Commissioner David H. Stevens, and MHI representatives Dick Ernst and Thayer Long. Just about everyone in the room seemed to have a hobby horse interest to ride – if they even deigned to share their thoughts. Many didn’t. Will tell you this; I was as pleasantly surprised at MHI’s Thayer Long’s passionate remarks challenging an FHFA representative about their ‘chattelless’ Duty to Serve stance; as I was disappointed at MHARR’s Danny Ghorbani’s lukewarm commentary from time to time.*2
What I will share, are some general pro & con observations recorded during the 2 ½ hour meeting.
An eight page, undated (presumably 2 June 2010) memorandum was distributed at the summit/roundtable, re: ‘Title I Manufactured Home Loan Program Clarification and Guidance.’ This was well received, and, hopefully, is a precursor of improved chattel finance conditions for the MHIndustry once Ginnie Mae puts their ‘chop’ on it. Want a copy? Contact Danny, Thayer, or me.
In my opinion, the best – but – dismal summary of MHIndustry’s present day malaise was offered by Larry Keener, president & CEO of Palm Harbor Homes. He described how the affordable nature of HUD Code manufactured housing has been destroyed by cost of capital (i.e. 3 basis point differential between personal property and real estate – secured loans), and, present day competition with ‘short sales’ occurring throughout the site – built resale housing market nationwide. His bottom line? The manufactured housing industry sorely needs ‘a level playing field’ to survive!
Mr. Keener’s apt observations highlighted two additional factors; one repeated over and over at the event – but never with any definition or quantification; and another, while brought up twice, was all but ignored.
In the first instance, ‘affordable housing’ was cited in near mantra fashion, time and again, sans any attempt at definition or description whatsoever. No one in the room had any idea whether the ‘speaker of the moment’ was referencing housing expense factors, the Housing Opportunity Index, housing wage, or workforce housing perspectives. This was an apt example of why everyone involved in housing discussions should go back to the drawing board and agree upon what they’re talking about; otherwise, ‘affordable housing’ and ‘housing affordability’ can – and will continue to mean, whatever the user/misuser, of the moment, wants it to mean!*3
And then there was the perennial issue regarding how manufactured housing is – or should be valued: either via cost – based (book) method, or the comparable sales method used for all site – built housing? This controversial subject is touched upon in the Manufactured Housing Financial Primer (p.29).*4 What it does not say, nor was this brought out at the Summit Meeting, is the MHIndustry, out of one side of it’s mouth, lobbies for a level playing field (e.g. ‘Treat us like housing, not trailers!’), while routinely using the ‘book method’ to generally undervalue homes when repossessed, and or taken in trade for higher priced new ones, widening the loss and profit margins respectively. As long as GSEs (Government Sponsored Enterprises) opt for ‘the easy way out’ by endorsing book valuations of manufactured homes, this double standard will continue to be a proverbial albatross around the industry’s collective neck, dragging it down, down, down. And don’t forget, the GSEs declined to participate in this event! What’s that tell you?
As the roundtable/summit drew to a close, Commissioner Stevens shared his five ‘takeaways’ from this meeting: an openness to chattel finance guidelines and best practices, learn more about lien perfection matters, ascertain ‘real pricing’ of manufactured housing*5, study new duration models re lifetime loan default statistics, and, seek a clearer separation between the characteristics and needs of lenders serving manufactured housing, and those active in conventional housing markets.
Finally; the 800 pound guerilla in the room! Perhaps it’s my affinity for landlease (nee manufactured home) communities, and ‘matters thereto pertaining’, but I found myself wondering, all morning, ‘when’ are they going to talk about how manufactured housing chattel finance relates to the contemporary on – site sale and financing of new and resale manufactured homes within 50,000 such income – producing properties nationwide? Well the matter never really did come up – except when Ed Hussey of Liberty Homes tried unsuccessfully to interest Commissioner Stevens in the aforementioned ‘appraisal issue’. Then, at the very end of the meeting, Lois Starkey, of MHI, asked Gary McDaniel of YES! Communities, to tell the gathered execs about ‘what was going on in the LLCommunity asset class’. Gary was quick to point out this was somewhat off – topic, but went on to describe an ongoing project orchestrated by several major property portfolio owners/operators, to ‘grow’ a new body of chattel loan performance data, to effectively counter the infamous Greentree ‘killer’ stats of years past. Point? This is another worthy aspect of manufactured housing chattel financing that received little to no attention at this (One time?) event.
Will this roundtable/summit produce measurable results? I doubt it – for two reasons. First, had there been any real passion going into this meeting, hints would have been dropped beforehand, to plan to stick around for working sessions during the afternoon, i.e. one – on – one opportunities to learn and discuss various aspects of manufactured housing finance. That didn’t happen. Even more telling, was the obvious and complete lack of public notice or request, for a follow – up session to this one. SO, with no subsequent performance measurement events in place, it’s highly unlikely there’ll be significant performance improvement! For this industry observer the MHSummit simply an educational, worthwhile networking event, but not much more than that.
For that matter, here’s a summary statement that encapsulates where HUD Code manufactured housing and chattel (personal property) finance is, at this time in our industry’s 60 year history:
“Say ‘Good bye’ to the GSE’s as a secondary market for manufactured housing – related (chattel) capital, & ‘Hello’ to landlease (nee manufactured home) community owner – financing of new and resale home transactions on – site, ‘Duty to Serve’ verbiage notwithstanding! And, the Grand Conspiracy, or Near Perfect Storm continues to grow in reality and intensity!” You’ve gotta be asking yourself: ‘Who’s going to be left to manufacture, sell, and finance manufactured homes when all this plays out?’
As always, I welcome your opinions and critique of these views. Reply directly to this blog posting or via the MHIndustry HOTLINE: (877)MFD-HSNG or 633-4764.
1. For a copy of MHI’s excellent Power Point presentation, contact Thayer Long @ (703)558-0678
2. MHARR. Manufactured Housing Association for Regulatory Reform @ (202) 783-4087
3. For a detailed treatment of ‘affordable housing’ and ‘housing affordability’, read HOUSING AFFORDOGRAPHY, PMN Publishing, Franklin, IN. 2008
4. Available for $29.95 (postpaid) from PMN Publishing: (317) 346-7156
5. For a clear and startling look at ‘real $ pricing models’ comparing land & home vs. in – community housings sales transactions, from ‘affordable’ and ‘risky’ transaction perspectives, request a free copy of the widely – used ‘Ah Ha!’ & Uh Oh!’ formula page, by phoning the MHIndustry HOTLINE; (877)MFD-HSNG or 633-4764.
Postscript. Want to read even more on the subject meeting in Elkhart, IN? MHI & MHARR have already published summaries penned from their perspectives. What you’ll want to read, however, is Precision Capital Funding’s lengthy, pithy letter to Congressman Donnelly. Phone 9217) 971-3968 to request a copy! It’s interesting this viewpoint is penned by a financier who was not invited to ‘have a seat at the table’ where manufactured housing chattel finance was discussed for 2 ½ hours….
If you own/operate one or more landlease communities in North America, and haven’t already done so, mark your planning calendar to be in Phoenix, AZ. @ 15 – 17, 2010, for the 19th annual International Networking Roundtable! This is a ‘by invitation only’ event, limited to the first 200 sign – ups. Product and service vendors are welcome to attend as event sponsors. In both instances, contact us for a registration brochure, containing the list of 20+ seminars and panels, scheduled for this year’s event – complete with Show Homes! (317) 346-7156
George Allen, Realtor®, CPM® Emeritus, MHM
Consultant to the Factory – built Housing industry &
The Landlease Community Real Estate Asset Class
Box # 47024