HB3849 & SB3484, & flawed MHBusiness model

Blog # 2011 Copyright 2012 9 September 2012

Perspective. ‘Land lease lifestyle communities, a.k.a. manufactured home communities, & earlier, ‘mobile home parks’, are the real estate component of manufactured housing.’

I.

HB3849 & SB3484 Won’t ‘Fix’ the MHBusiness Model, but….

II.

List of 25 Most Influential Persons in Manufactured Housing & the Land Lease Lifestyle Community Asset Class almost complete!

III.

Mark Your Calendar with these Dates Now! The MHIndustry & LLLCommunity Businesses of Today will be Different Tomorrow!

I.

HB3849 & SB3484 Won’t ‘Fix’ the MHBusiness Model, but…

House Bill # 3849 & Senate Bill # 3484 won’t ‘fix’ the MHBusiness Model; but portions thereof, address two mortgage finance regulations being developed by the Consumer Financial Protection Bureau (‘CFPB’), as required by the Dodd – Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203). Two regulations potentially impacting HUD – Code manufactured housing industry’s ability to provide truly affordable financing options to low and moderate income individuals and families desiring to purchase our unique, transportable, quality, ‘green’, non – subsidized housing product.

In the first instance, this legislation proposes a reduction in the threshold by which small balance manufactured home personal property (‘chattel’) loans are considered ‘High – Cost Mortgage Loans’ (‘HCML’). A HCML is considered to be a predatory loan, when the annual percentage rate (‘APR’) of the loan, is considered high, compared to Government Sponsored Enterprise – subsidized rates (a.k.a. GSE – subsidized rates), or exceeds points and fees thresholds. Note. Manufactured home loans are susceptible to such categorization, given their generally smaller size and lack of a secondary (housing sales) market. Furthermore, owners of small land lease lifestyle communities (a.k.a. manufactured home communities, and before that, ‘mobile home parks’) who finance such home sales are particularly at risk if this change is not effected. Probable result if not passed? Most LLLCommunity owners would likely cease lending to the very citizenry who need such financial help the most, but are least likely to receive it from local housing market lending institutions! Signs of such retrenchment already abound, among property owners/operators who’ve already started leasing their owned homes on – site, rather than risk ‘carrying paper’ – at least for the time being.

In the second instance, this proposed legislation clarifies those selling manufactured homes, NOT otherwise engaged in the business of mortgage origination, will NOT be considered mortgage originators under the federal S.A.F.E. Act (i.e. Safe And Fair Enforcement of Mortgage Licensure). And for land lease lifestyle community owners, who finance but a limited number of manufactured home sales each year, this provision would reinforce any given state’s ability to provide such exemption.

But know what? These two proposed legislative provisions, in HB # 3849 & SB # 3484, otherwise, have little effect on the flawed Business Model now practiced throughout the HUD – Code manufactured housing industry. A weekly blog posting is neither the time or place to dig into such a serious and perennial matter, in any detail. The responsibility for implementing and engaging in such a momentous, and potentially controversial, undertaking – in this veteran industry observer’s opinion – lies with one or another of the two national advocacy bodies ostensibly representing manufactured housing’s business interests in the nation’s capitol. In the meantime, here’s a partial list of the flaws that should be addressed, IF and WHEN a Blue Ribbon Task Force, comprised of businessmen and women from all segments of the industry and realty asset class, convenes:

• Lack of a secondary manufactured housing sales market in every local housing market; one to be characterized, in part and in time, by housing valuations based on market sales comparables; a functioning, realty type, multilisting service; escrow ‘closings’; training and licensing of housing sales personnel; and more…

• Lack of chattel loan programs within practical reach of the manufactured housing industry’s characteristically low – to – moderate income customer base

• Lack of willingness, by manufactured housing marketers, sales persons, and mortgage originators, to sell homes and effect loans, only when mortgage principal, interest, taxes, insurance, AND household utility expenses (a.k.a. PITI & utilities $) are all included within the widely – accepted 30% Housing Expense Factor (‘HEF’) measure of affordable housing! Until such time, we’ll continue to ‘sell & mortgage more house than our typical homebuyer can afford’, effectively saddling them with 40 –50% HEF burdens (i.e. 40 – 50% of their annual income going for housing costs alone!) when they pay their household utility expenses in addition to the 30% HEF that contains just PITI factors.

• Lack of sensitivity, on the part of some land lease lifestyle community owners/operators, to keep rental homesite rent rates in sync with other forms of multifamily rental housing in the same local housing market. There are various ways to do this, including the long known (Since mid – 1970s) and applied 3:1 Rule, where on – site homesite rental rates are approximately 1/3rd that of the largest 3BR2B conventional apartment or townhouse leased in the same local housing market.

This short list merely brushes the rough surface of Business Model issues deserving investigation and an airing, by a Blue Ribbon Task Force. Again, such an investigative and resolution – seeking body might be appointed by one or another of the two national advocacy bodies claiming representation responsibility for one or more function segments comprising the HUD – Code manufactured housing industry and its’ realty component, the land lease lifestyle community asset class.

Better yet, open participation on the Blue Ribbon Task Force to anyone in the MHIndustry & LLLCommunity asset class willing to pay his or her own way, and willing to commit to attend all the task force sessions.

II.

List of 25 Most Influential Persons in Manufactured Housing & the Land Lease Lifestyle Community Asset Class almost complete!

Yep; I’ve been surprised and pleased at the strong and continuing responses to the request first made, at this web site and blog, weeks ago, for input to this first time ever List of 25 Most Influential Persons in Manufactured Housing & the LLLCommunity Asset Class! Where are we today? To date, 23 names are in play. And there’s still time to add more recommendation(s) to the list. Simply phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 to tell me, or FAX it to (317) 346-7158.

The final and very public List of 25 Most Influential Persons in Manufactured Housing & the LLLCommunity Asset Class will be published as part of the 24th annual ALLEN REPORT (a.k.a. ‘Who’s Who Among Land Lease Lifestyle Community Portfolio Owners/operators Throughout North America!’), distributed as a lagniappe in the January 2013 issue of the Allen Letter professional journal. Are you presently a subscriber to this monthly MHIndustry & LLLCommunity newsletter? If not, phone (317) 346-7156 to do so. Subscription is only $134.95/year – and, for the time being, includes the aforementioned ALLEN REPORT at no extra cost.

Speaking of the ALLEN REPORT. The annual letter and questionnaire, to LLLCommunity portfolio owners/operators, soliciting property portfolio size and statistical benchmark information (e.g. occupancy, OER, etc.), is ‘in the mail’, and deadline for returning completed questionnaires to PMN Publishing, is 30 September 2012. These too can be faxed to (317) 346-7158. If you own and or fee manage five or more LLLCommunities, and or 500+ rental homesites (even if in just one LLLCommunity) you’re eligible to be included in this 24 year Who’s Who of our unique realty asset class. Do not be left out! To request a letter and questionnaire, phone (317) 346-7156.

III.

Mark Your Calendar with these Dates Now! The MHIndustry & LLLCommunity Businesses of Today will be Different Tomorrow!

Read this carefully. Starting two weeks ago, a handful of land lease lifestyle community owners in Georgia clearly demonstrated what can be done, in behalf of peers in the manufactured housing industry, to bring education, networking, and more, to their regional housing market! If you missed that watershed event, attended by 142 businessmen and women, read about it in last week’s blog posting at this website (Scroll back into the archives to blog # 210) and visit www.seco12.org for several of the Power Point presentations shared at that symposium. This is where things began to….

This week, 12 – 14 September, in San Diego, CA., 200 land lease lifestyle community owners/operators, and their favorite realty – secured mortgage originators will convene for the most educational seminars and panels (at least 22), intense interpersonal networking (at eight social – meal events), and unparalleled deal – making opportunities available anywhere, anytime, in the manufactured housing industry. This is the 21st consecutive year this segment of the MHIndustry has met; and indirectly, been responsible for eventual founding of MHI’s National Communities Council division, professional property management training and certification (i.e. MHM®), and the research and publication of at least a half dozen HOW TO texts, covering the development, investment in, and management of LLLCommunities. And here too, things will likely continue to…

From 7 – 9 October 2012, the Manufactured Housing Institute (‘MHI’) will host its’ annual meeting in San Antonio, TX. And it’s National Communities Council division, under the new institute executive leadership of Jenny Hodge, VP, will also convene. If you’re a direct member of MHI and or the NCC, you owe it to yourself to be present for the proceedings. For information, contact Bruce Savage, via (703) 558-0666. Who knows, something downright exciting might be in the offing, this time around…

Enjoy November and December with your employees and families, celebrating Fall and the Holiday season! Catch your business planning breath before the new year begins…

Then, as the New Year dawns, so does the 2013 round of manufactured housing shows, beginning with the Louisville MHShow (previously, the Midwest Manufactured Housing Show), from 23 – 25 January in, ‘you guessed it’, Louisville, KY. What many of us LLLCommunity owners/operators are watching for this year, is to see how many HUD – Code home manufacturers ‘have finally gotten the word’ that new home sales = placements in land lease lifestyle communities! The last two years, that wasn’t the case, with hardly a presence of any Community Series Homes or CSH models. Hopefully, this year will be different. Want more info on the Louisville MHShow? Phone _________________

MHI will hold its’ annual Legislative Conference in Arlington, VA., @ 24 – 26 February 2013. Should be interesting to observe, by then, what (if anything) has happened in the interim, between aforesaid annual meeting and this one, nearly five months later. What do you think will be the case? Guess it depends on ‘what’ happens (if anything) during and after the annual meeting in TX. Maybe a Blue Ribbon Task Force? Or how ‘bout a paradigm shift of sorts? In any event, if a direct member of the NCC division, it’ll be a good idea to be present this time around. For event and membership information, phone Jenny Hodge @ (703) 558-0666. Tell her, ‘George sent me!’

27 February 2013. Manufactured Housing Manager® professional property management training and certification class scheduled for Tulsa, OK., the day before the Great Southwest MHShow begins. There’re nearly 1,000 MHM®s designated to date, most of whom own and or operate land lease lifestyle communities throughout the U.S. and Canada. Are YOU one of them? If not, phone (405) 634-5050.

28 February – 3 March. The Great Southwest Manufactured Home Show takes place in Tulsa, OK. This year promises to be ‘bigger and better’ than the one in 2012. And the program is designed to ‘keep MHRetailers and LLLCommunity folk on the show floor buying homes’. BUT, there’ll also be opportunity to learn firsthand, the ‘State of the Manufactured Housing Industry & the Land Lease Lifestyle Community Asset Class’, as well as valuable pointers regarding how to get into and remain ‘in compliance’ with the plethora of federal and state financial regulations now plaguing the industry and property type. For information, phone(405) 634-5050.

A postscript of sorts. Know what a widely known and well – regarded MHIndustry businessman, of many years experience, has to say about the preceding ‘hinted about’ matters this Fall? His comments were received shortly after the suggestion was made, in a recent blog posting at this website, for a new MHInitiative® (formerly, National State of the Asset Class caucuses per 2/27/2008 & 2/27/2009)

“…if MHI doesn’t ‘take the bait’ in October, or indicate solid interest in doing so during their annual Legislative Conference in February, just ‘days before the Great Southwestern MHShow’, then ‘Why Not Do So There?’ Don’t know ‘bout you, but I get so tired of all this posturing, when we should be seizing the initiative and, in so far as possible, (plan and) shape our own collective (business) future!”

So, it isn’t just me out there encouraging our two national advocacy bodies to take ownership and leadership of the future of manufactured housing (Maybe it’s time to come up with another name ‘for what we do’) in the U.S.. And know what? While land lease lifestyle community ‘might be cutting edge terminology for the asset class, there’s still much work to be done, there too, regarding how we do – and don’t do business, e.g. lack of professional property management training and certification of on – site and regional managers, for starters; not to mention the uneven rental homesite rent rates mentioned earlier.

Ah, should make for an interesting Fall meeting season ahead of us. Let’s just hope our salaried and elected leaders don’t let us fall further behind in new home shipments, reputation with consumers, and housing finance.

*****

George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry,
The Land Lease Lifestyle Community Asset Class &
Affordable Housing Purists & Enthusiasts Nationwide
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

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