The New Old Model for Manufatured Housing Fiknance!

The New Old Model for Manufactured Housing Finance!

“In 1999, only a few of the 500+/- portfolio owners/operators of landlease (nee manufactured home) communities engaged in on – site marketing, sales and self – finance of resale manufactured homes. Virtually no one sold & self – financed new manufactured homes on – site. However, ten years later – by end of 2009, most did so,
to the tune of $ 3 ½ +/- billion dollars – in contract sale ‘paper’ carried by these owners/operators!” To learn why, read the 21st annual ALLEN REPORT (a.k.a. ‘Who’s Who Among Landlease Community Portfolio Owners/operators Throughout North America!’). *1

In the meantime, how ‘bout manufactured housing chattel (personal property) finance of new and resale home transactions outside landlease communities? If you truly don’t know, ‘it’s nigh nonexistent TODAY (March 2010)’, except from what’s generally referred to as The Big Four, along with some lenders in various local housing markets. *2

So, what is this New Old Model for Manufactured Housing Finance? *3

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The 20 year (i.e. 1979 to 1999 +/- ) business model, of relying on outside lenders to handle all or most landlease community manufactured housing financing, is long gone! This reality was confirmed during an October 2009 meeting, in San Francisco, CA., of the industry and asset class’ de facto Think Tank, Urban Land Institute’s (‘ULI’) Manufactured Housing Communities Council (‘MHCC’). At that time, a 13 point ‘Baker’s Dozen’ of focus areas was identified and articulated per how LLCommunities looked ten years ago (1999), today (2009), and possibly ten years hence (2019). One focus area had to do with chattel (personal property) finance of new and resale home transactions on – site. Their prediction for this focus area in 2019? ‘Chattel $ on – site via (local) lenders and (excess) cash flow’ only! The other dozen focus areas? Read the aforementioned 21st annual ALLEN REPORT.

Despite what you just read, know there’re several quiet but concerted efforts afoot in Washington, DC., to improve the chattel finance climate relative to HUD Code manufactured housing and the landlease community asset class. First; contact the Manufactured Housing Institute (‘MHI’) to learn of their initiatives: (703) 558-0678, Thayer Long; then the Manufactured Housing Association for Regulatory Reform (‘MHARR’) @ (202) 783-4087, Danny Ghorbani. Second; know there’s ‘a consortium of major LLCommunity (portfolio) owners working hard to get FHA, Fannie & Ginnie Mae to increase their support for consumer financing to the MHIndustry’, in part, by broadening lending standards to ensure low – cost financing is readily available to worthy consumers who meet down payment and income standards. And third; there’s now a fledgling body of independent MHRetailers intent on rejuvenating their heretofore dying segment of the industry; visit Fourthly; there’s a printed work being prepared, hopefully in time for sale and distribution at MHI’s annual Manufactured Housing Congress in mid – April in Las Vegas, NV., tentatively titled: The MH $$$ Primer, ‘All You Ever Wanted to Know About Manufactured Housing Finance But Didn’t Know Who to Ask!’ Will also be available via this website hosting the Official MHIndustry & LLCommunity Blog. But even with all that said…

Today, many LLCommunity owners/operators continue to engage in what some psychologists call ‘magical thinking’; believing the manufactured housing industry’s decade long doldrums (i.e. 1999 to 2009) will magically end (somehow), and past normalcy will return! Another reality that flies in the face of such wishful thinking, is that even if a revised FHA Title I program emerges, it’ll enable third party chattel lenders (.e.g The Big Four) to service only a small percentage of would be homebuyers who should be our customers. This because of tightened qualifying requirements for would – be borrowers, and so many borrowers with already bruised credit incurred during recent and continuing times of economic stress.

Bottom line? LLCommunity owners/operators, not presently engaged in self – finance of homes sales transactions on – site, are going to have to get over lingering fears of this new old business model, and get actively into the fray, or remain on the sidelines unable to facilitate filling vacant rental homesites with new or resale homes, to ‘keep the site rent meter running’.

As was pointed out earlier, most property portfolio owners/operators now self – finance, and many (most) have built loan portfolios of significant size, some valued at millions of dollars apiece. Unfortunately, some, if not many, have patterned present day policies and procedures (i.e. business model) on ways lending was effected during the 1960s and 1970s; meaning, most of these loan portfolios have little liquidity, as they are of questionable legality, noncompliant with contemporary lending regulations, and often not properly underwritten. This reality is oft compounded by the presence of rental units, rent – to – own and lease – to – own homes, as well as retail installment sales contracts, effectively tying subject homes to the LLCommunity proper, consequently lowering the overall investment value of the income – producing property!

The alternative to the ‘old business model’ per se? Create a captive finance company, as automobile manufacturers did decades ago, and as others have done in other business types. *4

A captive finance company is different from the heretofore described ‘buy here – pay here’ (process), since finance actions are effected by a separate legal entity functioning apart from the MHRetail or landlease community operation. This approach limits liability, is easier to keep legal, simplifies compliance simpler, and is often less costly. So, where’s a captive finance company to get its’ funds to loan on housing transactions?

Some LLCommunity owners/operators borrow money against their assets, even their income – producing property(ies), to fund home loans, or make loans out of the property’s excess cash flow. Real estate mortgagees (i.e. lenders) worry such practices dilute the overall value of the realty asset, and favor situations where homeowners/borrowers/site renters are committed, at least in part, to a separate finance company; not a scenario where site rent, and home payments are all rolled up into one interrelated financial package.

The aforementioned alternative is to establish an independent, but related finance (captive) company that raises its’ own capital and operates in a professional manner. Since the subject company makes the loan, there is no need for a ‘buy here – pay here’ presence in the LLCommunity, and therefore, nothing to ‘disclose’. Because the firm is indeed separate, it will normally operate on its own merits, meaning it will professionally underwrite its’ loans, and carefully observe the legalities and compliance issues, as well as strive to make a genuine profit.

So, if a LLCommunity owner/operator, where does this presentation of our industry and asset class’ new old model for manufactured housing finance leave you? If this author/blogger can be of assistance, in any way, don’t hesitate to respond to the blog proper, via our website:, or phone (317) 346-7156.


NEXT WEEK. No promises; but unless something of greater importance or timeliness intervenes, watch this blog for a probable call for a third National State of the Asset Class (‘NSAC’) caucus sometime during 2010, or early 2011 if we can afford to wait that long.

This NSAC suggestion was proffered at the conclusion of a recent FOCUS Group gathering of LLCommunity owners from six states, meeting in Ruskin, FL. The first NSAC caucus convened in Tampa, FL. @ 2/27/08; a second, titled: an Historic SUMMIT Meeting, between HUD Code manufacturers and LLCommunity owners/operators occurred 2/27/09. This one? To accomplish something many have talked about ‘for years’, but have never had to brass to address collectively, i.e.

• Decide on our own (i.e. MHIndustry & LLCommunity segments),once and for all, a workable definition of ‘affordable housing’ &/or ‘housing affordability’, then apply appropriate descriptive terms and characteristics to those types of HUD Code manufactured housing design/production/distribution, applicable and marketable as such! It is past time for our industry to finally seize the high ground of ‘affordable housing’ via marketing and image improvement, and DELIVER!

• Again, once and for all, aggressively address the oft extreme disconnect between the 1) well – designed, attractive and professionally managed, family and 55+ LLCommunities, & the 2) often old and functionally obsolete, unattractive and poorly managed, multifamily hovels perennially giving our contemporary, quality, attractive, ‘green’, energy efficient, non – subsidized, transportable type factory – built housing a bad name & social image in most local housing markets!

• Decide now (2010) is time to establish and nurture a viable secondary market for the sale of resale homes, relative to valuation, multilist access, and transactions effected by licensed/certified realty professionals, using escrow accounts and realty – type ‘closings’!

Any of these areas ‘hot buttons’ for you, pro or con? I surely hope so; and if so, let me know! That way you won’t be left out when a third NSAC caucus is scheduled. Otherwise, you have only yourself to blame for not being involved in the now national effort to Save Our Industry! If you don’t know about this growing initiative and movement, scroll back through the blog archive at this website ( to ‘ManuFractured Housing C o n s p i r a c y or near Perfect Storm Sequel’ and previous blog postings. And if you’re reading this, thinking one or another national MH trade or advocacy bodies will (eventually) ‘take the lead’ in addressing the three pivotal matters, and more, just described, then you’ll likely wait too long. Remember; at the rate of decline in HUD Code housing shipments experienced during 2009, by year 2020 – only ten years hence, total shipments that year will number 225! Can we afford to wait any longer to address this industry’s core challenges? I think not, and hope you agree!

Respond directly via this blog posting, email:, or the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Better yet, let the elected and salaried leaders at MHI and MHARR know your opinions and feelings on these matters pro and con!

End Notes.

1. To obtain a copy of the ALLEN REPORT, phone the MHIndustry HOTLINE: (877) MFD – HSNG or 633-4764. Available for $250.00 per report, or ‘free’ with $134.95 subscription to the new Allen Letter professional journal (12 issues).

2. The Big Four: 21st Mortgage Corporation: Tim Williams @ (800) 955-0021; Triad Financial Services, Inc.: Don Glisson, Jr. @ (904) 223-1111; C U Factory Built Lending, LP: John Harcher @ (216) 533-4797; & U.S. Bank – Manufactured Housing finance: Scott MacFarlane @ (501) 978-1020.

3. The following paragraphs were prepared from material supplied by Kenneth Rishel of Precision Capital Funding @ (217) 971-3968

4. Next Captive Finance workshop is scheduled for Dallas, TX, on 11 & 12 May. For information:

George Allen, Realtor®, CPM®, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024
Indianapolis, IN. 46247

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