READ it HERE the FIRST Time; LATER, maybe ELSEWHERE!
READ it HERE the FIRST Time; LATER, maybe ELSEWHERE!
Another Seller – Finance Option; Pithy Blog Responses; Next to New ‘repos for sale’; Saber Rattling again, or finally Throwing Down the Gauntlet?!
From a veteran MHIndustry exec: “Just printed a few of your recent blog postings to read before the _____game. I’m working on a speech for an upcoming association meeting and want to be certain I have fresh information, so I turned to your blog!” RR
“Well written blog posting. I am concerned, however; people reading your Summary of intra – industry squabbling might misinterpret. Those issues have no traction in a united industry association. But if MHIndustry segments go their own way, watch out!” KR
“I’ve decided to get off the sidelines and re – assert myself nationally. Only a few years before I retire, and I want to retire from a prosperous industry.” XX (Who doesn’t?!)
“Interesting stuff. Is anybody listening; or are they ignoring the fact their cheese has moved? This is a great break out opportunity (‘The CAMPAIGN’) for our industry.” NB
Regarding HUD Code housing manufacturers taking 100% responsibility for installation of their product: “We did this on all our product, as part of the price a homebuyer paid for our new homes. My nose got bloodied on the financials the first year, but in the eight years following, we had to defend only ONE consumer lawsuit; and our service costs, as a percent of sales, dropped by 80%! It works!” XX
“This paradigm change is needed for all home manufacturers, if we expect the public to regain confidence in us & buy our homes, assuming the financing is there to pay for it.”
And this quoted from the Wall Street Journal during first week of November, in an article titled: ‘Mobile Home Makers Try to Stitch Together a Rebound’. “Don Glisson, CEO of Triad Financial Services, Inc., which finances manufactured home sales, says ‘…the industry could use an image – building national advertising campaign, (Think’ The CAMPAIGN’, described in previous three blog postings at this website! GFA) but ‘nobody wants to pony up the money because times are so tough.’ “
Furthermore, “A bigger disadvantage may be financing costs. Most manufactured homes are financed with personal property loans, meaning the loan is secured only by the home and not the land, which is often leased from the operator of a (landlease) housing community. Rates on such loans, which are considered riskier, are around 7% to 11%, compared with less than 5% for conventional (real estate – secured) home loans.” WSJ
“Although 2008 housing legislation required government – backed mortgage companies Fannie Mae and Freddie Mac, to support financing for manufactured homes, the regulator of Fannie and Freddie, the Federal Housing Finance Agency, recently decided such loans should be funded only when backed by land as well as by homes. Most buyers of manufactured homes (these days) either don’t own the land or don’t want to mortgage it. Unless the financing disadvantage is eliminated or reduced, ‘the manufactured home industry seems destined to struggle and dwindle’, Mr. Buffett said in his annual letter to shareholders earlier this year.” WSJ
So, faithful blog flogger (As in ‘promoter or publicist’), what’s on your mind these days?
The MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or via email@example.com
Atlanta, Georgia – based LLCommunity owner/operator Spencer Roane, offers this sage and timely, albeit lightly edited advice regarding ‘Lease – Option Financing and the S.A.F.E. Act’. *1 (Review with Counsel before Implementing!)
Some in the manufactured housing industry suggest community owners who engage in lease – option financing of manufactured homes, should switch to retail installment contracts and get licensed under the S.A.F.E. Act; or, deal with a lender who isolates the property owner/operator from said act. Well, here’s another increasingly popular perspective, which LLCommunity folk should review with their legal counsel.
Unlike a lease – purchase, which obligates the (home) buyer and seller to consummate the sale, the lease – option alternative is simply a lease with an option purchased by the tenant/lessee, to buy the home for a specified amount at a specified time in the future. Both parties agree the purchase amount, at the time the option might be exercised, is simply a one’s opinion of what the fair market value of the home will be at that time. For example, the lessee might lease the manufactured home for $300 per month for eight years, and agree to pay $1,000 for the option to purchase the home after five years, for $10,000; or, upon expiration of the lease, for only $3,000. And, continuing with this example; if the lessee exercises said option, at the end of the lease, the property owner might choose to finance the purchase amount, for $250 per month, over the next 12 months.
Most agree the S.A.F.E. Act applies to ‘mortgages’, and mortgages are defined as a transaction where the lender/seller holds a security interest in the property, e.g. home. Leasing/renting does not involve a security interest. Hence, one might argue, no mortgage is created by the lease portion of the lease – option transaction, therefore the S.A.F.E. Act does not apply!
What about the part of the above – described transaction, involving the property owner choosing to finance the purchase of the manufactured home after the option is exercised? If the property owners had no security interest in the home during that latter part of the transaction, one might further argue no mortgage is created, and again, the S.A.F.E. does not apply. Why would a property owner finance the home without holding a security interest in it; i.e. deliver title to the buyer and only hold a unsecured promissory note? Why not? The property owner might choose to do so, because the lessee has now established an excellent (rental) payment history. The home isn’t likely to be relocated, as the cost of moving is usually much higher than the value of the home. Even if the home is moved, the buyer is still obligated under the promissory note.
Another argument suggesting the S.A.F.E. Act wasn’t intended to address lease – option transactions, has to do with a primary goal of the S.A.F.E. Act: prevent the predatory lending practice of arbitrarily taking a borrower’s home without a judicial hearing (non – judicial foreclosure). Breaking a lease, however, always involves a hearing before a judicial authority. Hence, one can argue regulatory authorities are much less concerned about a landlord taking advantage of a tenant/lessee, than an unscrupulous lender taking advantage of an unsuspecting borrower.
A caution. Some ‘lenders’ claim their loan program allows LLCommunity owners to employ retail installment contracts, and not be subject to the S.A.F.E. Act. Perhaps. But in some cases, the lender is loaning the property owner’s funds, dollars specifically earmarked to finance on – site home sales. Well, if the LLCommunity owner/operator provides specific instructions to the lender regarding buyer qualifications and terms of financing, the property owner is, in effect, controlling the transaction. Might such transactions be considered a sham or a ruse by regulatory authorities?
Another concern with third party lenders, is cost and servicing effectiveness. In this day and age of rock – bottom interest rates, and record low manufactured housing shipments and sales, can loan transactions absorb 15 – 20 percent per year servicing fees? Can collections representatives, several states away, be more effective ‘over the phone’, than on – site community management personnel? If local personnel are already handling on – site rent collections and are involved in even a part of finance collections, why not do it all? And if third party servicing is ‘sold’ as a means of avoiding S.A.F.E. Act compliance, might regulatory authorities view this as yet another ruse?
Finally; one additional argument which may tip the scales in favor of lease – option transactions, is the recent focus of various regulatory authorities on sloppy foreclosure practices and paperwork. Hardly a day goes by we don’t read of another lender who thought its’ attorneys, agents, and staff were handling foreclosures correctly, only to find one detail or another (e.g. not reading legal documents before signing) was mishandled, putting the entire foreclosure process in jeopardy.
A nuance of the S.A.F.E. Act, is that it involves Federal ‘guidelines’ enforced by specific state legislation. Hence, there are wide variations in enforcement, from state to state. And even when S.A.F.E. Act licenses might not be required, other state licenses might be . So, community owners interested in lease – option transactions, in about a dozen states, are currently seeking legal counsel to ensure (their) compliance with applicable lending laws. Some are even sharing the cost of research and of drafting state – specific lease – option contracts. If you’re interested in participating in this cooperative effort, contact the web site posting this blog for appropriate contact information.
Announcement! On a semi – related matter; need late model repo manufactured homes to fill vacant rental homesites? Go to repogallery.com or phone (586) 337-5373 (Citizens Bank of Michigan) for dozens of possibilities.
There’s a not – so – new, but increasingly visible game in town these days…
“Nationwide, residents of manufactured homes have historically faced issues of predatory lending and constrained financing options. However, evidence suggests well – built, energy – efficient HUD Code homes, properly sited on ‘owned land’ or in a resident – owned community, and financed fairly, can appreciate in value and represent an attractive, affordable asset – building housing option.”
If that paragraph, quoted from ‘News & Updates from CFED’ grabbed your attention, you’ll likely want to participate in CFED’s Manufactured Housing Webinar Series: ‘Promoting Quality Affordable Housing’ on Wednesday, November 17th, from 2 – 3 PM EST. For information, go to cfed.org/knowledge_center/events/ or phone (202) 408-9788 or 207-0149. Panelists? Several; but MHIndustry & LLCommunity aficionados will recognize Stephen Wheeler, managing director at Housing Advisory Services.
Landlease Community Development Opportunity in Fast Growing Energy Boom Area of Northwest North Dakota!
Don Westphal has taken a proposed 260 rental homesite manufactured home community through the local approval process, and his client seeks a development partner, or someone to take complete control of this timely project. Located on US highway 2, West of Stanley, ND, the Montrail County board has enthusiastically supported the much – needed landlease community project, and the city of Stanley has agreed to supply water to the project. Engineering for the project would be completed during the Winter months, in anticipation of a Spring ground breaking and occupancy in – fill during late 2011. Contact Don at firstname.lastname@example.org for details.
‘Same ol Saber Rattling of the Past, or a Throwing Down of the Gauntlet?’
This industry observer does not plan to become involved in what appears to be an evolving matter at this time; but if you read the MHIndustry’s tealeaves of sorts, i.e. press releases, weekly reports, and the like, emanating from our industry’s national advocacy bodies, you’ve observed increasingly pointed and strident, and at times defensive, postures and tone of late…
Well, just this past week (11/9/2010), per board fiat: “…MHARR’s new approach and direction will be designed to uncover, expose and address all the matters that have contributed to a seemingly endless decline (in MH shipments), which has had a devastating impact on the industry’s small businesses, and the mostly lower and moderate – income American consumers of affordable housing.”
And the ‘movement to contact’, as we’re wont to say in the Marines, has begun. Suggest YOU take a gander at MHMSM.com newsletter feature by Eric Miller.
Beech Street Capital Expands into Landlease Community Lending!
Damon Reed and Dan Armstrong have joined Beech Street Capital, and will lead the company’s expansion into landlease (nee manufactured home) community lending! The veteran loan originators will be based in the Birmingham, Alabama production office, and will be responsible for originating LLCommunity loans on a nationwide basis! Reach Damon via (205) 991-6700X 8191 and Dan via (205) 991-6700 X 8192
GFA Management, Inc., dba PMN Publishing ‘Searches for a New Platform’
Allen Letter professional journal subscribers were surprised to learn, in November’s issue of the monthly LLCommunity newsletter, of GFA Management, Inc., dba PMN Publishing’s now public search for a new, permanent, not – for – profit or for – profit platform. This action is intended to ensure continuation of the annual ALLEN Report, International Networking Roundtables, popular Manufactured Housing Manager (‘MHM’) professional property management training and certification program, two business newsletters, many books, and dozens of standard forms, into the future.
Since the first of November, three interested parties have visited Indianapolis, IN., to discuss this rare opportunity, and one has expressed interest via correspondence.
For the record; the ideal platform for these work products (i.e. more than a half dozen ‘profit centers’) at play here, is an existent or new not – for – profit national trade body with strong ties to investment real estate and or manufactured housing. Since this focus limits the number of capable successors or partners, the opportunity was made public, in the hopes another entity or person, with known passion for the asset class, will step forward, in either a not – for – profit or for – profit mode, to continue the many valuable products and services designed solely for landlease community owners/operators nationwide. The ideal or WIN – WIN combination, whether not – for – profit or for – profit based, will be a national platform balancing a desire for legacy recognition, on one hand; with, compensation that’ll guarantee said LLCommunity products and services are taken seriously, on the other hand. And frankly, there is no personal or corporate deadline in effect here! Barring an acceptable, mutually beneficial transition, life and work will likely continue unchanged beyond year 2011. Interested in discussing this matter further, simply phone (317) 346-7156. GFA
1. Spencer Roane has been a landlease (nee manufactured home) community owner/operator for 26 years, and engages in lease – option ‘financing’ to sell manufactured homes in properties he owns and manages. He obtained the mortgage loan originator (MLO) license and mortgage broker (MB) licenses required by the S.A.F.E. Act, but was advised by legal counsel, the Act does not apply to his lease – option financing. He serves on the Georgia Manufactured Housing Association (GMHA) board of directors and is a direct member of the Manufactured Housing Institute’s (MHI) National Communities Council (NCC) division. Spencer can be reached via email@example.com or (678) 428-0212.
George Allen, Realtor®, CPM®Emeritus, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024
Indianapolis, IN. 46247