Blog # 401 Copyright 2016 COBA7® @ 19 June 2016; community-investor.com website
Perspective. ‘Land-lease-lifestyle Communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’
This blog posting is the sole national advocacy voice, official ombudsman & historian, research, reporter & online communication media for North American LLLCommunities!
To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance®, a.k.a. COBA7®, use Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.
COBA6® Motto = ‘U* Support US & WE Serve U!’ Goal of its’ print/online media = ‘Not only inform & opine, but transform & improve MHBusiness Model Performance!’
INTRODUCTION. Part I. Sets the stage for ‘Where Will You Be On 1 August 2016?’ Part II is the most detailed treatment to date, of ongoing machinations at the Federal Housing Finance Agency (‘FHFA’) pertaining to Duty to Serve (‘DTS’) rulemaking relative to manufactured housing finance. And Part III codifies future reporting of differing HUD-Code home shipment totals, monthly & YTD, by IBTS, HUD, MHARR, COBA7®, also MHI.
I.
MHAlive!
Birth of a New Annual Manufactured Housing Event
The first workday of every August hundreds of MH & RV businessmen and women travel to Elkhart, IN., to honor industry pioneers and leaders from throughout the U.S., for their corporate contributions and personal legacies. This pilgrimage culminates that evening at the annual RV/MH Hall of Fame Induction Banquet, when ten men and women are feted in a glorious manner! Have you attended a Hall of Fame Induction Banquet? You really should!
Over the past few years, during the daytime before the Hall of Fame Induction Banquet, small groups of businessmen and women have convened in the Elkhart facility’s library or board room, to participate in mini-writers’ conferences. Two years ago, the focus was on ‘writing one’s legacy for family & friends’; this past year, focus shifted to ‘writing in general – for publication & profit’. 2016 will be different, as there’s an industry wide need to be addressed; specifically, how to replace the unfortunate slack suffered upon demise of the Think Tank being nurtured via the Urban Land Institute’s (‘ULI’) Manufactured Housing Communities Council (‘MHCC’), a few years ago?
To date, no national manufactured housing or land-lease-lifestyle community advocacy-focused body, not MHI, MHARR, or COBA7®, has called for any form of national, public, all inclusive convening of businessmen and women concerned about the past, present, and future of the HUD-Code manufactured housing industry & land-lease-lifestyle community asset class, to gather for a Think Tank like parsing of industry and realty asset class issues! This did happen once, in a minor-but-landmark way, at the 23rd annual Networking Roundtable in Peachtree City, GA., in 2014, when Ken Rishel of Rishel Consulting & Michael Sullivan, CPM® of Newport Pacific presented opposing perspectives and rousing challenges to the audience: to ‘maintain the MH business model unchanged’ vs. ‘make radical changes, if need be, to appeal to changing market demand’; and, the next day, both GSEs, Fannie Mae & Freddie Mac, opened wide the doors of communication between LLLCommunities and their offices! So, see what can happen?
Here’s what’s been proposed to date for 1 August 2016. The first half the morning of ‘MHAlive!, to focus on the ‘Status of the Search for Chattel Capital &/or a Hybrid Form Thereof!’ (Read Part II following!) Last half the morning to focus on ‘Move Over Traditional Chattel Capital Financing; Enter Lease-Option!’. This to be followed by a group luncheon off-site. And the first half the afternoon = FREE TIME to enjoy the RV/MH Museum, or participate in a two hour mini-writers conference focused on ‘How to Organize & Pen Your Personal & Corporate Legacy for Family & Friends’. When that session concludes, it’ll be time to return to hotel rooms to freshen up and change for evening festivities at the annual Hall of Fame Induction Banquet.
At this point in time, the two events, on the first workday of the month of August; 1 August, are separate in registration and facilitation. No fee planned for participation in ‘MHAlive!’ Think Tank and mini-writers conference in the afternoon. Pre-registration required though, so phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 to register for MHAlive!
And, to make reservations to attend the evening RV/MH Hall of Fame Induction Banquet, phone (574) 293-2344. There will be between 400 and 700 RV & MH industry leaders and pioneers present that evening! It is really quite an elaborate affair.; something everyone should experience at least once during their career. I go every year….
II.
MH Seeks DTS Solutions at FHFA with GSEs!
(In layman’s language, that’s ‘Manufactured Housing (i.e. national advocacy groups) seeks Duty to Serve solutions at the Federal Housing Finance Agency (‘FHFA’), relative to Fannie Mae & Freddie Mac!’)
To date, the Manufactured Housing Institute (‘MHI’), Manufactured Housing Association for Regulatory Reform (‘MHARR’), and the Community Owners (7 Part) Business Alliance®, or COBA7®, have weighted-in on the timely and strategic topic, Duty to Serve, with written comments pertaining to proposed rulemaking by the FHFA, relative to both GSEs. There’s even an informal national task force of volunteer businessmen and women, not exclusively aligned with any one of the aforementioned groups, taking an independent, third party ‘look’ at the matter, also in search of a practical DTS solution.
Well, a recent feature article in MULTIHOUSING PROFESSIONAL magazine (May/June 2016), pp. 38-40, focused on ‘Fannie & Freddie’s multifamily programs’, indirectly sheds helpful light on the aforementioned MH (chattel capital) effort; specifically, how ‘Each GSE utilizes its own risk-sharing models (to) protect it from losses’ – models that worked effectively throughout the recent national economic downturn, a.k.a. the Great Recession. Quoting in large part….
“There’s broad consensus the next iteration of the housing finance system must protect taxpayers, emphasize the private markets, support a broad variety of housing options, and remain liquid throughout ebbs and flows of an economic cycle.” It’s generally agreed, Fannie & Freddie’s multifamily programs, as opposed to single-family portfolios, already meets those four objectives! How effectively? “…GSE’s combined multifamily comprehensive income reached $30 billion from 2008 through the second quarter of 2015, per Division of Housing Mission and Goals 2015.” P.38
How have the two GSEs managed to accomplish this impressive feat? “…because of the GSE mu8ltifamily programs’ adherence to 1) prudent underwriting standards, 2) sound credit policy, 3) effective third-party assessment procedures, 5) conservative loan portfolio management, and most importantly, 5) risk-sharing and retention strategies that place private capital ahead of taxpayers.” Here’s how that works for each of the GSEs:
• ‘Fannie Mae employs a delegated originator and service model (the Delegated Underwriting & Servicing program, or DUS), where risk is shared between Fannie Mae and the DUS lender. Each loan purchased is securitized, and resulting mortgage-backed security sold to investors carries a full guarantee of Fannie Mae in the event of default. Their two risk-sharing models? PARI-PASSU = Fannie Mae 7 the lender share losses on a pro rata basis, with one-third borne by the lender and two-thirds borne by Fannie Mae. And STANDARD = Lender bears a share of losses, calculated using a tiered loss-sharing formula (generally involving a first-loss position and a cap at 20% of original loan amount( based on established risk factors, such as loan-to-value and debt-service coverage ratios.”
• ‘Freddie Mac employs PROGRAM PLUS, a prior approval business model wherein it underwrites each loan purchased from its’ network of sellers, creates a multi loan, multiclass security, and sells that security to investors. The repayment of the senior-most security is guaranteed by Freddie Mac, while the bottom 10% to 15% of first-loss securities are sold to qualified investors.”
Now, pickup on this salient point: “GSEs’ multifamily programs address a market failure in the housing finance system that results in an abundance of capital for high-end properties in top-tier markets but largely ignores middle market and affordable housing needs in urban cores and leaves secondary and tertiary markets underserved.” While this point was penned with conventional apartment lending in mind, it sets two stages where 1) land-lease-lifestyle community acquisition and refinance, and 2) new HUD-Code home mortgages, are concerned. In the first instance, there’s nary a problem for 100+ rental homesite properties to qualify for Fannie Mae-guaranteed mortgages, HOWEVER, there’s a major issue (i.e. lack of access to chattel capital) relative to new HUD-Code manufactured homes – whether installed on scattered building sites conveyed fee simple, or within LLLCommunities on rental homesites. It’s right here, at this second stage, that Duty to Serve comes into play!
So, how are manufactured housing (single-family finance) proposed DTS programs to be articulated, even emulate existent GSE programs that work well, in the near future, ensuring solutions that produce results? In my opinion, and in the most simplistic fashion, ‘copy and apply what presently works in conventional multifamily programs – to the manufactured housing single-family finance scene’!
To that end, read and study seven principles identified by the article’s authors, Doug Bibby of NMHC & Robert DeWitt of GID, used to help shape multifamily finance reform efforts at the GSEs. Then ask yourself, ‘What might apply to manufactured housing’s dire need for access to chattel capital?’ Here, only the descriptive headings are listed. If you’d like the complete treatment, respond directly to this blog posting, or phone the official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 and ask for the additional details.
1. Provide access to an explicit government-guaranteed backstop
2. Provide broad liquidity support, not just ‘stop-gap’ or emergency financing
3. Protect taxpayers
4. Restrict federal credit support to the security level
5. Support private capital participation and protect taxpayers through effective guarantee structure and pricing
6. Empower strong regulators
7. Retain limited portfolio lending without a federal guarantee
Again, the obvious question is, how many of these seven principles are applicable to manufactured housing single-family finance market reforms relative to proposed DTS rulemaking? This MHIndusty observer does not know, but this might well be a likely start in the right direction.
Or is it?
During a preliminary review of this blog (Part II), by one of several MHIndustry leaders, it was suggested that attempting to apply ‘what works’ in GSA multifamily finance arenas, to the manufactured housing need for chattel capital, might be akin to fitting a square peg into a round hole. That reviewer’s counter suggestion is similar to what is generally referred to as ‘zero-based budgeting’, where one starts with few to no preconceived notions or ‘rules of thumb’, and creates a new and comprehensive budget, or in this case – a proposal, ‘out of whole cloth’, so to speak. Whew! That reads tough-to-do to me. But, it certainly might have merit. What do you think?
If, as you’re read this posting, you have practical ideas you’d like to share with our peers, simply contact me – and send an electronic file to gfa7156@aol.com or hard copy to GFA c/o Box # 47024, Indpls, IN. 46247.
III
Here We go Again, Only It Gets Worse…
‘COBA7® Marks One Year Anniversary, Documenting & Outing Monthly New HUD-Code Home Shipment Reporting Flaws!’
As manufactured housing historian, it pains me to highlight, month after month, how one of our industry’s national advocates fails to report the same number of new HUD-Code home shipments tallied, for a fee, by the Institute for Building Technology & Safety (‘IBTS’). Now the matter worsens…
How so?
As one might suspect, when giving thought to the matter, Year To Date (‘YTD’) totals will also differ! For example, IBTS shipment total for April 2016 is 6689, & 2016 YTD total = 25,790 – likewise reported by HUD, MHARR & COBA7®! For the same time frame however, MHI reports 6,697 new HUD-Code homes shipped in April, with a 2016 YTD total of 25,673. Sure, that’s only a 24 home difference YTD, but a $1,492,800 gap (i.e. 24 homes X $62,200 @ 2013 average value = $1,492,800.) so far – when there’s really no excuse (at least none being offered) for any divergence at all!
Tell you what.
Henceforth, in this blog, the Allen Letter professional journal, and the Allen CONFIDENTIAL!, we’ll report monthly shipments of new HUD-Code homes in the following fashion – until all the manufactured housing industry’s national advocates report the same month end & YTD shipment totals…
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New HUD-Code Manufactured Homes Shipped During the month of APRIL 2016.
Institute of Building Technology & Safety reports 6,689 homes shipped, & 25,790 YTD
HUD, MHARR & COBA7® also report 6,689 new homes shipped, & 25,790 YTD
MHI reports 6,697 new homes shipped, & by extension, 25,673 YTD
For accurate manufactured housing & land-lease-lifestyle community data & statistics, phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.
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George Allen, CPM®, MHM®
Box # 47024, Indpls, IN. 46247
(317) 346-7156