Archive for November, 2010

Whose Responsibility is Housing Affordability?

Sunday, November 28th, 2010

I.

Whose Responsibility is Housing Affordability?

Maybe the time has arrived for a ‘New Way of Thinking’ when it comes to manufactured housing sales in landlease communities & retail salescenters…

Think about it! When was the last time, or anytime for that matter, you or your salespersons sold a manufactured home, within or outside a landlease (nee manufactured home) community or retail salescenter, and had this sincere, conscientious thought:

“Can this homebuyer truly afford to buy this new or resale manufactured home?”

Even more to the point; did or do you even care, to accept any responsibility for ensuring the affordability of said home, relative to the homebuyer or household purchasing it? If you work in the manufactured housing industry, and or the landlease community (‘LLCommunity’) business, the answer is probably and understandably ‘No’. Why? Because, as some are wont to say, ‘It just generally isn’t in our DNA (i.e. business model) as housing purveyors!’ A review of manufactured housing’s sales training literature, over the past 40 years, clearly demonstrates we haven’t been taught, nor do we generally teach today, personal and corporate responsibility for ensuring our ‘affordable housing’ product evinces ‘housing affordability’! By practice, we’re taught to sell to what customers are willing to pay each month, not necessarily what they can realistically and comfortably afford.

Gary W. Pomeroy, back in the 1970s, then VP of Marketing for Golden West Homes, and chairman of the Western Manufactured Housing Institute’s marketing committee, authored the 200 page textbook titled: How to Successfully Sell New and Resale Manufactured Homes. Early on in this classic text, Pomeroy describes the importance of qualifying one’s prospect: “If your prospect has the need for housing, if he has the income to enable him to purchase housing, and if there is a degree of urgency…he is someone you should spend time with.” P.22 (emphasis added. GFA)

A couple pages later, the author described how to ‘set the banker up as the source for qualification’ by saying: “Mr. Jones…the prices of our homes run from $15,000 to $35,000, (Reader; remember, this is 40 years ago!) and our lender tells us a person should have a gross income between ______ and ______ per month, with a minimum down payment of between ______ and ______, depending upon the price of the home he purchases.” P.25. Notice the not so subtle focus ‘depending on the price of the home he purchases’, NOT ‘…depending on how much prospective homebuyer can realistically afford to pay on his or her mortgage each month.’ Does this focus on home price absolve the housing salesperson, and salescenter for that matter, of personal and corporate responsibility for ensuring our affordable housing product is ‘just that’ for the variety of homebuyers we serve? I don’t think so! But the real issue is; ‘What do you think?’ And, if that wasn’t enough to consider, know there’s ‘something missing’ from the quoted material. See if you can spot it when rereading the paragraph, and the next few to follow.

A couple pages later, Gary Pomeroy introduces Grayson Schwepfinger and ‘his ‘use of a rather unique system of qualifying the customer’, characterized by ‘locking all the homes on a sales center…forcing prospects to come to the office’, where they are pre – qualified, by Urgency, Income & Need, before seeing homes. P.26. How so? Schwep’s methodology isn’t described, but we’ll revisit Grayson later, when we take a look at contemporary 21st century sales training literature….

I became a Redman Homes, Inc., MHRetailer, on – site in my first owned LLCommunity in the early 1980s. Still have the Retail Sales Training Program used by that firm, to teach me the ropes of manufactured housing sales. Here’s what they said about how “Qualifying the customer is a necessary and productive part of the selling process. If customers are properly qualified, they are more likely to buy the house that is right for them. If they do, they will be happy, satisfied customers who will generate a lot of referral business. You need to know what the customer is looking for in a home, and their financial limitations, so you know what you have to work with.” P.7 Fair enough, and a good start. So, what’s next?

“There are two approaches to qualifying a customer – the qualifying interview, and the rapid qualification. Most sales centers have a prospect interview form they use with their customers.” OK, but why no sample Interview Form included with this program guide? And the ‘rapid qualification’ approach? A series of questions: “Do you work nearby?”, “Do you live near here?” “How soon are you going to need your new home?” “Are you married, do you have any children?” Give me an idea of what type of home you are looking for, and what kind of monthly investment you are interested in making (i.e. monthly loan payment amount)?” & “Do you have any idea of what you are going to invest initially (i.e. down payment)?” p.9 No dollar guidelines or formula offered here, just that bugaboo emphasis on ‘what customers are willing to pay each month, not what they can comfortably and realistically afford.’ And know that ‘something missing’, mentioned earlier, is absent here too. Spotted it yet?

During the 1990s, as I traveled from one end of the country to the other, working as a freelance management consultant, serving LLCommunity owners/operators and MHRetail salescenters, picked up the Selling and Training Techniques manual prepared and used by franchiser A-1 Homes, out of Texas (in the MHBusiness since 1969). Their approach to Qualification? Three parameters: 1) Determine if customers live in a mobile home (Their term, not mine; and in 1990s, ‘that’ should ‘tell you something’ about their mindset) or have any other potential trade – in, through tactful and complimentary inquiries., 2) Maximum monthly investment customer will accept based on income, 3) Specific floor plan desired and any unusual requirements, such as space for a piano or a family heirloom.” Once again, no dollar guidelines or formulae offered for qualifying prospects, and continued emphasis on ‘maximum’ monthly mortgage payment, with no mention of ‘affordability’. And yes, once again, there’s ‘something missing’, from this 1990s training material, just as during the 1970s and 1980s.

Champion Home Builders Company, of the late 1980s & early 1990s, (cum Champion Enterprises, now Champion Homes) took a different approach to qualifying homebuying customers. In Joe Morris’ Sales Success School, the author defined USP (‘Unique Selling Proposition’) as being “A real or percieved (sic) consumer benefit in a product or service that distinguishes that product or service from the same class of competitive products or services.” P.L1-9. Whew! Did you get that? I barely did. Anyway, a few pages later, an effort is made to ‘splain’ why PRICE isn’t a USP, by pointing out: “At every income level, there is affordable housing” & “the affordable tag has no sales appeal – people buy affordable things but in response to some other appeal” P. L1-12). OK. But where are the guidelines or formulae one might use to calculate affordability per homebuying prospect? None are given! Though, a few pages later (P. L2-4) the manual describes USPs for three distinct manufactured housing markets: singles, young marrieds, seniors (empty nesters); and once again, implying differences in ability to qualify to purchase new and resale homes, but sans any practical aids. Yes, ‘something missing’ from this training exercise as well…

Know what? Doesn’t get any easier, or to the point, quoting contemporary authors/trainers who straddle the fence between site – built housing and various types of factory – built housing. In Jerry Rouleau’s The Complete Guide to Selling New Homes, on page # 91 three of five Finance Qualifying questions are these: “3) How much of your cash savings will you put into the building project?, 4) Gross Income? (Combined total yearly income), & 5) What are you looking to spend per month for mortgage payments?” Point? Once again, as in the previous several examples, the ‘affordable housing’ or ‘housing affordability’ question or determination is left to the homebuyer, with little to no guidance from the home seller. But, to Rouleau’s credit, on the next page (# 92), he does provide a Rule of Thumb, for calculating one’s Mortgage Limit – presumably, for a ‘house and realty combination’: “Take the combined gross annual income (i.e. homebuyer or household) and multiply by 2.5. This will help you establish a rough mortgage limit. When interest rates are around 6%, you can calculate the mortgage limit at 3 times gross income. If interest rates go up to 12% you have to use a number 2 times gross income.” P.92. We’ll return to the results of this Rule of Thumb shortly. In the meantime, and for one last time, have you spotted the ‘something missing’ from this recitation too?

Give up? Well, here’s that something that’s been missing! Not once, in any of the preceding tutorials, regarding the sale and financing of ‘mobile homes’, HUD Code manufactured homes, has mention been made regarding anticipated monthly homesite rent amount(s), characteristic homes sited in LLCommunities! Obviously, from the historic through to contemporary training and methodology, emphasis is generally on 1) home only, and 2) designed to relieve the homebuyer of whatever cash he/she thinks they can part with each month to buy, and pay a mortgage on said home – irregardless of other recurring household expenses for taxes, insurance, and utilities – even that phantom factor, ‘homesite rent’, literally throwing any idea or concept of housing affordability right out the window. Moving right along…

Said we’d return to Grayson Schwepfinger. In his Selling for Success Seminar material, dated year 2000, he presages the case I’ve been building in previous paragraphs: “There is no place they (homebuyers) can go for information on how to intelligently invest in a manufactured home! If you wanted information on how to invest in a manufactured home, where would you go? There aren’t any books, seminars, audio or video tapes that will tell you how to intelligently invest in one of our homes. All the internet gives them is prices.” (pages not numbered)

While Grayson’s point is on target (i.e. Nowhere to go for help!), he isn’t entirely correct. There are indeed books ‘out and about’ that purport to teach ‘How to Buy a Manufactured Home’, but they’re either universally incomplete, per content of previous paragraphs (Oft produced by MHIndustry advocacy bodies, etc.) or by self – proclaimed manufactured housing experts with axes to grind. A few such titles include:

Kevin Burnside in his Buying a Manufactured Home (168 pages, 1999), opines “The one constant…dealers want maximum profit from you.” And, “Your pocketbook is their target.” Pages # 15 & 31.

Steven Taylor, writing in MANUFACTURED HOMES, The Buyer’s Guide (144 pages, 2004) suggests, “For the best possible deal, time your shopping for the home either at the end of the month or…last two weeks of December….” P. # 99.

Wes Johnson’s does no one any favors in The Manufactured Home Buyer’s Handbook (226 pages, 2005), when he hyperbolizes: “The manufactured housing industry…feeds a negative stereotype of itself because of tactics its’ salespeople employ. Take every trick a used car salesperson ever had and multiply the total exponentially.”

Yikes! If this tripe commentary is even half true, there’s a lot the manufactured housing industry needs to do internally before ‘going national’, or even regional, with a brand promotion and or image – improvement campaign. But in the meantime, where do the previous dozen paragraphs take us? Right back to the title and subtitle of this week’s blog posting!

Whose Responsibility is Housing Affordability?

Maybe the time has arrived for a New Way of Thinking when it comes to manufactured housing sales in landlease communities retail salescenters

What do YOU think? What are YOU going to do about it, in and around your sphere of business and trade association influence? In the meantime, allow me to share at least one hopeful and helpful development along the line of calculating housing affordability, based on proven affordability parameters, designed to estimate maximum recommended ‘affordable’ and ‘risky’ purchase prices for new and resale, privately – owned homes of any type, sited on realty owned fee simple with home, or leased, as in a landlease community!

For results – comparison purposes, and hearkening back to Jerry Rouleau’s Rule of Thumb, given $36,000 as Annual Gross Income (‘AGI’) or Area Median Income (‘AMI’) per local housing market identified by postal zip code, here’re ‘his results’ first, then those from the new methodology, a.k.a. ‘Ah Ha! & Uh Oh! Formulae.

J. Rouleau’s Rule of Thumb:

AGI X 2.5; or $36,000 X 2.5 = $90,000 max mortgage @ stick – built home & real estate

AGI X 3 when 6% interest, or $36,000 X 3 = $108,000. -do-

AGI X 2 when 12% interest, or $36,000 X 2 = $72,000. -do-

The relatively new, though increasingly popular ‘Ah Ha! & Uh Oh! Formulae:

AGI or AMI X 30% expense factor & $333/month rent & 9.5%, 20 yr. loan = $41,000 for ‘affordable’ home purchase sited in a LLCommunity!

AGI or AMI X 30%, with TI/util pd separate, & $333/month rent & 9.5%, 20yr. loan = $68,000 for ‘risky’ home purchase sited in a LLCommunity!

AGI or AMI X 30% expense factor & 6.5%, 20 yr. loan = $101,000 max mortgage for ‘affordable’ home and land purchase! Pretty close to Rouleau’s $108,000, with mortgage term at 6%. (For estimated value of home alone, back out land cost)

AGI or AMI X 30%, with TI/util pd separate, & 6.5%, 20yr. loan = $134,000 max mortgage for ‘risky’ home and land purchase! (For estimated value of home alone, back out land cost)

I hope you see the differences, at a couple levels. First, leaving the home payment decision up to the homebuyer is frequently going to trump affordability. Consumers are rarely schooled in the concept, let alone methodology about how to measure and achieve it, to their ultimate benefit. And Yes, that’s what we rely on lenders to do for us; and today, they’re covering that responsibility well. But it wasn’t but a couple years ago, when many banking institutions transitioned from prudent lending to predatory lending, clearly demonstrating their commitment to ‘affordability’ was in turn trumped by their desire to fatten the bottom profit line. So, hope you too ‘see the light’ relative to protecting your homebuyers, sometimes from themselves. And don’t forget, those folk buying new or resale homes in, or going into LLCommunities, must figure in the appropriate homesite rental amount, right along with calculating their maximum monthly mortgage (PITI) payment!

I truly hope there’re blog floggers (readers) ‘out there’ who are already looking out for the affordable housing interests of their prospective homebuyers! If so, would you please share your business model and methodologies with me; to in turn, present in future blog postings like this one? Thank You. GFA

If you’d like a free copy of the aforementioned ‘Ah Ha! & Uh Oh! Formulae worksheet, simply respond via this blog, website, email: gfa7156@aol.co, or the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. And Yes, continue to send your observations, critique, suggestions for improving this weekly blog posting.

II.

FLASH NEWS. A possible investment opportunity for an experienced LLCommunity developer/investor.

If you’re familiar with what’s happening about 100 miles North of Las Vegas, NV., relative to what’s locally referred to as the SWIP Utility Corridor (bringing long term electrical power to CA from ID, Canada, and elsewhere), then the following opportunity to develop raw land into much – needed rental housing (i.e. LLCommunity &/or RV Parks) will interest you.

“The Caliente City Council has approved a parcel split of the 30.98 acre parcel fronting HWY 93 into two parcels. 16.24 acres zoned Highway Commercial on the HWY 93 frontage, and 14.54 acres zoned Recreational Vehicle Estates, with a Conditional Use Permit for 123 Mobile/RV Estate lots on the southern portion.”

The two parcels can be purchased separately, if someone wants to build the Mobile/RV Estate lots. The lots will be permitted as manufactured housing rental homesites. The RV Estates ordinance allows each site two RV/Mobile hookups, so that during the SWIP construction, the crews can occupy both (total of 246 RV spaces). The Recreational Vehicle Estates zoning allows the sites to continue as RV rental sites and allows long – term stays to continue. The sites can be marketed as manufactured home rental sites, where the home will hook up to one pedestal, and the second pedestal can be used for guests in RVs. Manufactured home marketing and sales can start immediately.

For information, contact Jan Cole via jancole@land-water.com or 6772 Running Colors Ave., Las Vegas, NV. 89131 or phone (702) 270-9194

***

George Allen, Realtor®, CPM®Emeritus, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class

Do YOU Have ‘A Sense of Personal Legacy?’

Sunday, November 21st, 2010

A Sense of Personal Legacy…

doesn’t usually blossom overnight, unless you expect to die tomorrow.
And, one’s sense of corporate legacy, is another matter altogether….

A sense of personal legacy, if it emerges at all during a lifetime, is generally a multistep process, materializing with little, much or no fanfare at all, as one….

1. Learns the basics of life and values during one’s youthful years, through family, education, and variety of experiences, especially from one’s mistakes and successes.

2. Gradually, and generally quietly, identifies one’s personal life focus and career path; all the while learning and maturing in a variety of ways, along the way.

3. Cultivates and nurtures his/her personal life (e.g. spiritual perspective or not, political preference or not, family situation or not, amateur sports or not) and career path (e.g. employment or entrepreneurship, corporate religion perspective, local or national politics, amateur or professional sports, active or reserve military, teaching or academic pursuits, or variety of creative outlets, to name just a few possibilities), continue to learn, decide, and mature along the way.

4. At some point in time, during middle age for some, before or after for others, one realizes ‘You are your legacy!’ to those with whom one interacts personally and corporately; and or influences, by one’s chosen career path or paths – whether sequential or concurrent.

5. ‘The Question’, if and when asked, may be – and oft is, ‘What will be my legacy in years to come? And will it be manifested within or through…’

• Interpersonal relationships nurtured, damaged, repaired, and otherwise?

• The family or families begun and nurtured; and or whose members are now out in society on their own?

• Books authored, poems penned, and art created?

• Edifices designed and built; machinery and devices conceived and patented; formulae and methods originated, perfected, and protected?

• Informal and formal recognition by one’s peers?

• Philanthropic giving reflective of one’s interests and passion?

• College or university scholarships and academic chairs funded?

Corporate legacy? May, or may not be, an extension of one’s personal legacy, if and when one is closely identified, positively or negatively, with a particular familial, societal, political, military, religious, sport, organization, or business entity.

So, where are YOU on this lifelong personal and corporate legacy journey? Too young to care? Too busy to notice yet? Just becoming aware? Deciding now? Or; sad to say, maybe too late….

At this point, you’re likely asking yourself, ‘What makes legacy the lively topic for this week’s blog posting?’ Here’re several recent and pending happenstances that should get all of us to thinking.

First; there’re plenty of business pioneers who’ve shaped industries during their careers. But know what? Within the manufactured housing industry and landlease (nee manufactured home) community real estate asset class, these folk have rarely penned autobiographies, nor have biographies been authored about them. In the first instance, there’re but two such autobiographies: John Crean’s The Wheel & I, describing how he founded and grew Fleetwood Enterprises; now, Champion’s Fleetwood Homes. And there’s Jim Clayton’s First a Dream, chronicling his life and work story – with notable differences, in content, between the first and second editions.

To the best of my knowledge, there’ve been but two biographies describing the successful business careers of landlease community developers/owners/operators. The first, a biography titled A Danish American (long out of print), written by Kris Jensen, Jr., describing his immigrant father’s life and work. I recently wrote Kris Jensen, III., suggesting the time might be write to pen a Part II, telling ‘the middle generation of the story’, as Kris III now runs Connecticut – domiciled Jensen Communities. And then there’s the recently released Trailer Park Twins, profiling the colorful and successful business careers of identical twins, Darrell and (the late) Harrell Cohron, of Indianapolis, IN.

So, is there a book in you; or should one be penned, describing your life and work? I’d be pleased to assist, if you contact me for advice. In the meantime, suggest you go to a local bookstore and buy a copy of Dan Poynter’s Self – Publishing Manual, to learn how to organize material, prepare a working outline and author the book; then how to self – publish it. I buy the latest edition of Dan’s book each time I begin the process of writing another nonfiction book. Note that none of the aforementioned four books were published by traditional acquisitions publishers. This observation brings us to the second major step in this creative process, marketing your book! For that purpose, you want to obtain a copy of John Kremer’s 1001 Ways to Market Your Book. Seriously.

Additional opportunities for legacy preservation, where MHIndustry and LLCommunity asset class are concerned, can be found with the RV/MH Heritage Foundation’s prestigious Hall of Fame. “…the first Hall of Fame Awards Banquet (occurred) August 21, 1972, at the (now defunct) RV/MH Midwest Show at South Bend, Indiana, (during which) 14 industry pioneers were inducted. Hall of Fame awards have been made each year since, except 1976, when the organization was inactive.” Since 1972, hundreds of worthy men and women, from these two industries, have been inducted into this Elkhart, IN., domiciled repository of history (library) and artifacts (museum). To learn how to recommend someone for induction into the RV/MH Heritage Foundation’s prestigious Hall of Fame, phone either (800) 378-8694 or (574) 293-2344.

The RV/MH Heritage Foundation beginning its’ final phase of construction, recently announced the availability of naming rights for the Elkhart facility’s Grand Hall ($1,000,000.), Manufactured Housing Hall ($1,000,000.) with shared naming rights, Outdoor Show Area ($1,000,000. per year for three years), complex naming rights for roadway/streets/boulevard ($100,000.), five lakes on premises ($50,000. each), large paving bricks engraved @ $500 apiece, or small paving bricks engraved @ $250. each. Frankly, this is a near once in a lifetime, incredible opportunity, to ensure either your legacy in the MHIndustry and or LLCommunity asset class continues on into perpetuity – or a unique and lasting way for you to commemorate the lifework and memory of others worthy of such honor. Interested? Again, phone either of the numbers cited in the previous paragraph.

Hope you allow the content of this week’s blog posting to inspire you to pause and look at your personal and career legacy, and how you’d like to be remembered during years to come. A few possible alternatives have been described. Now it’s up to you to decide, and take appropriate action. If I can be of assistance to you, in some way to this end, reach me via the MHIndustry HOTLINE: (877) MFD – HSNG or 633- 4764.

*****
End Notes.

1. How to Find, Buy, Manage, & Sell a Manufactured Home Community, George Allen, J. Wiley & Sons, NY., 1996. Appendix B., page # 292. This book available for purchase from PMN Publishing. (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, Indianapolis, IN. 46247
(317) 346-7156

READ it HERE the FIRST Time; LATER, maybe ELSEWHERE!

Sunday, November 14th, 2010

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?!

I.

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 gfa7156@aol.com

II.

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.

III

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.

IV.

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 don@dcwestphal.com for details.

V.

‘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.

V

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

VI

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

***
End Note.

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 spencer@roane.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
(317) 346-7156

Time for Another MHIndustry Paradigm Shift?

Monday, November 8th, 2010

Time for Another Manufactured Housing Industry Paradigm Shift?

Status Quo, One Consolidated National Advocacy Body, or reorganized ‘Producer Only’ & ‘Post Production’ Associations dba MHARR & MHI?

I.

Disclaimer = ‘a statement of disavowal’. Webster. “I have no dog in this fight! OK, maybe three.”*1 However, I have no proclivity to or for any of the alternatives described in the above subtitle, simply a strong and enduring desire to see the HUD Code manufactured housing industry and landlease (nee manufactured home) community asset class well and effectively represented in our nation’s capitol!” GFA

So, what’s a paradigm shift? Popularized more than a decade ago, it was a trendy term to describe “a (business) example serving as a model or pattern”. Not heard much today, but know the manufactured housing industry (‘MHIndustry’) has experienced at least a half dozen paradigm shifts (i.e. Changing manner in which we ‘do business’) since the early 1970s.*2 However, what hasn’t changed or shifted during the past 30 years, is the way we’re represented and lobbied in behalf of, in Washington, DC and Arlington, VA. Hence the ‘question title’ of this week’s blog posting.

This conversation started, somewhat unexpectedly, with responses to the BEBA (‘Blast Email Blog Alert’) announcing last week’s blog posting titled: ‘The CAMPAIGN, Calculating Housing Price Points, & $$$ Talk!’ Hopefully you read that blog in its’ entirety, and ‘took action’ in one or more of the means suggested! In any event, last week’s BEBA went something like this: ‘Have YOU compared MHI’s WEEK IN REVIEW one pager ‘MHI Participates in MHCC Committee this Week’ with MHARR’s 12 page REPORT AND ANALYSIS describing the same event?’ If not, I suggested readers contact both advocacy bodies for copies of said documents, both dated 29 October 2010. Did YOU?

First off; I misspoke. MHARR’s REPORT AND ANALYSIS was not twelve pages long, only six. The ‘other six pages’ were three two pagers of talking points, describing why the Manufactured Housing Consensus Committee (‘MHCC’) should 1) ‘Oppose HUD Actions Undermining MHCC’s Role, Authority & Independence Provided by Law’; 2) ‘Reject the HUD – MHI Proposed Fire Sprinkler Standard for Manufactured Housing’; & 3) ‘Asset Its’ Statutory Right to Review and Comment on HUD’s Expansion of its’ Regulations’. Sorry ‘bout that. But know what? YOU should still obtain and read all 12 pages. To obtain a copy, phone (202) 783-4075. And, while you’re at it, contact MHI, via (703) 558-0678 and ask Thayer Long to point you towards a copy of (last week’s) WEEK IN REVIEW.

What I’m not going to do here, is pen a paragraph by paragraph comparison of these two disparate descriptions (As I’ve done before…) of this recent MHCC meeting – the volunteer body created more than a decade ago, upon passage of the Manufactured Housing Improvement Act of 2000. If you’re a businessman or woman with ownership stakes (a.k.a. Have ‘skin in the game’!) regarding one or more business interests related to HUD Code manufactured housing and or the LLCommunity asset class, YOU should be concerned enough about ‘What’s Happening!’ and ‘How You’re Represented!’ in our nation’s capitol to ‘Stay Informed!’ Nuff said.

A related perspective. Was recently made privy to informal correspondence among individuals debating the merits, or lack thereof, regarding creation of separate ‘Producer Only’ & ‘Post Production’ (nee ‘the aftermarket’) national advocacy bodies. One telling argument, against such a split, contained points presently ‘not on the table’, by dint of our semi – united industry, heavily influenced by housing manufacturers:

• Implement five & ten year warranties on all new homes
• Require final & comprehensive inspections of every new home prior to shipment
• Shift total responsibility for all new home installations to manufacturers
• Disallow direct sales of new homes by manufacturers
• Proscribe preferential new home pricing by manufacturers

Point? Enter ‘Producer Only’ & ‘Post Production’ advocacy bodies, and expect these five – and likely more, presently assuaged sore points, to become lively issues of dissension. No, the most desirable scenario is to speak with one voice, underwrite one national body!

The most pressing need of contemporary manufactured housing, and by extension, the LLCommunity asset class, is a united focus on solving (chattel) finance issues; which in large part, keeps annual shipments at the 60 year nadir 50,000 ‘new homes’ level, versus 372,843 ‘new homes’ shipped during 1998, the final year of our too short renascence.

OK, so where do we go from here? I have no idea. That is entirely up to those of you who patronize this website and blog posting each week, and have valuable stakes in the future (good) health of this industry and asset class. First step, obviously, is to become and stay informed. Reading this weekly blog posting, and monthly Allen Letter professional journal, are good starts. And there’s not better way to continue that process, than to become an active, direct member of the national advocacy body best representing your business interests, whether HUD Code home manufacturer, supplier, financier, or from the realty side of the house. What will YOU do?

II.

FLASH! Breaking News! You’re reading about it first here! The RV/MH Hall of Fame of the RV/MH Heritage Foundation in Elkhart, IN – national repository of our RV/MHIndustries’ and asset class’ history and heritage, via museum and library, will soon launch Invest in a Dream, an aggressive fund – raising program, to finance the final phase of facility construction!

Here’s what makes this NEWS. The RV/MH Hall of Fame will soon launch a ‘once in a lifetime and career opportunity’ for YOU to acquire ‘naming rights’, for yourself or someone of renown in the RV/MH industries, to be affixed to the new Grand Hall and Manufactured Housing (exhibit) Hall @ $1,000,000.00 apiece! There’re also naming rights opportunities for the Outdoor Show Area @ $1,000,000 per year; and various Roadways/Streets/Boulevards @ $100,000 apiece; plus five lakes at $50,000 apiece. It’s also going to be possible to buy large engraved Paving Bricks @ $500 apiece, and smaller engraved Paving Bricks @ $250 each. Point? You’re hearing about this NOW, before anyone else in the MH & RV industries. SO, if you’ve wanted to ensure your good name, or that of someone of renown from either of these industries or the landlease community real estate asset class, is publicly recognized and honored in perpetuity, phone (574) 293-2344 or (800) 378-8694 today, and ask for information and application form! Remember, this is truly a ‘once in a lifetime and career opportunity’. Don’t miss this opportunity and regret it later! GFA

******
End Notes.

1. Given my loyalty to three dozen HUD Code manufacturer Business Development Managers, a.k.a. ‘BDMs’ named at the NSAC II in Elkhart, IN., on 2/27/09; being a direct, dues – paying member of the Manufactured Housing Institute (‘MHI’) – as YOU should be too – phone (703) 558-0678; and, founding and present day board member of the National Communities Council (‘NCC’) division within MHI. As a 30 year industry consultant and LLCommunity owner, I’ve been told I don’t qualify for membership in the Manufactured Housing Association for Regulatory Reform (‘MHARR’) – or I’d belong there too.

2. If you’d like a free copy of the recently updated (November 2010) ‘MOBILE & MANUFACTURED HOSUING; serving the shelter needs of ‘newly weds & nearly dead’ for 50+ years! The PARADIGM SHIFTS: (are)….Phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 and request it.

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
(317) 346-7156