After writing “The Train to Oblivion” for MHMSM.com, I fully expected to hear from its readers. I knew some would take the opportunity to essentially agree with what I had written, though often doing so anonymously. Not good to be known with too strong an opinion.
After writing about 30 major pieces for the late, greatly-lamented-that-it’s-gone Manufactured Home Merchandiser, and nine years in the 2000s of writing monthly newsletters, I also knew I would hear from others who would object to my comments. There is a substantial contingent of folks in the industry who view their role as cheerleaders, rather than analysts. Anything which smacks of industry criticism or is less than championing the industry, is painted as “mistaken”, if not downright traitorous. These folks can react quickly and strongly, particularly when it sours their personal stew.
I sat my fat azz in law school for three years, graduating with high honors. I was twice accepted after law school for the PHD program at Harvard Law School, an opportunity which lost out to having our first child. The minimum it says about me is that I paid attention to what was being taught, which was to analyze situations, determine what was important from that which was merely noise, and then decide a course of action based on that analysis.
The “Oblivion” piece was a first step to setting up where the start point is at present for manufactured housing. Just as your need to know the “point of beginning” to give you directions to your destination, so we need to know the same. “Oblivion” set the start point, but is not, nor was it meant to be an all-encompassing white paper as to cause, effect and cure of the industry downturn. We’ll get to that.
The tenor of the piece is that from 1998 when 372,800 new HUDCode homes were shipped, until the present, as we “roll” along at 40,000 homes for 2011, something has gone grievously wrong. “Oblivion” sets the primary basis for that downfall as extremely flawed retail, chattel purchase money mortgages and the horrific loses associated with that, particularly in land lease communities. Truthfully, it just seems difficult to argue with that basic premise of “Oblivion,” whether you like it or not. Ask any lender.
The two salient critiques I got after publication were 1) there are some people doing well in the industry; and 2) I haven’t come up with any solutions. Let’s deal with each of these individually starting with “hey Marty, some are doing well!” I want everyone to do well, the more the better. But, the reduction in home shipments from 1998 to the present speaks not of success, but of disastrous failure. There is no other way to say it, is there? If that offends cheerleaders, so be it.
It is as if I were to write a piece on the present status of the buggy whip industry since 1890 and someone tells me they Googled “buggy whip” and there are a couple of companies out there still thriving. (True.) That begs the question of where the 100 million+ horses running around in this nation in 1890 have gone and the incredible downsizing of that industry catering to the horse as a primary means of personal travel. A couple of success stories on buggy whips presently are akin to several “I know people doing well” remarks posted to my piece. Missing in the replies were where over 10,000 retailers have gone since 1998, the loss of the vast majority of lenders, loss of many LLCs, home builders, suppliers and every other stripe in the 1989-2005 MH industry, a process which actually has yet to stabilize. We are and will be still “losing them.” And some are doing well? Well, bless me.
Surely it makes some feel good to talk about the advantages of “affordable housing,” buy here-pay here, LLCs as rental MH apartments, and the need to observe renewed attention to our sales efforts. All great stuff of course, but my piece is meant to trace the past and probable course of industry trajectory. In spite of many people said to be doing well, scant attention is paid to the 90% of the industry already gone and that the probable trend is for more. Hiding behind “some are really doing well, Marty,” seems to me to be myopic in the extreme, and non-responsive to the matter. Correction of a deficiency begins with the realization one exists. That is obvious, to me, though I’m open to new information about “the industry,” not a few patches of good remaining activity. Please start with an explanation of how a decrease of 330,000 home shipments is “doing well,” and how we can start an upward trajectory again. None of the measures enumerated have had any positive impact in that regard, yet. I live in hope, with great skepticism.
The second critique is that I appear to have no solutions, only pointing out problems. Interesting. My mentors never allowed that of me, or I of my people. It’s bad form. On my web site, as an example (martylavin.com), you’ll find an article entitled, “Hometown Banks 101: Where the money is.” The Banker who wrote in response to “Oblivion” talks about industry participants partnering with a bank. What a novel thought, and how interesting to suggest I haven’t spoken to that. Not only did I write an article on the subject for the July 2003 MHMerch, but I gave two annual back-to-back seminars at the Vegas show in the mid to latter 2000’s, both of which had over 125 participants and were the best attended of all seminars both years. I led the attendees thru exactly what is needed to be done to partner with a bank, including the following: “The first ingredient in this recipe for building a successful relationship with your banker is probably the most essential; you must protect the bank–the valued source of your funding–at all times by helping with difficult things.” I go on to enumerate the needed activities. See the article on my web site. I was there on this subject by 1972, protecting our bank, Guaranty Bank and Trust Company of Worchester, Mass, as we disposed of over 200 repos in the Carolinas, during that frightful 1974-1976 downturn. Our reward? A bank that stayed with us for years after, backing us up and down the East Coast. Yah, I think I got that one down awhile back.
Others have suggested I carp about the deficiencies of chattel lending, but have given no guidance on how to fix it. In a number of my newsletters I wrote copiously on exactly the needed solutions to correct the industry chattel lending model which had melted down, and in December 2007 I wrote the piece, “Saving Chattel Lending,” just one more in a long line of similar efforts. This one is full of possible solutions. Instead of being criticized for not offering solutions, it would be better to state I have spoken too much on the subject, with very few listening, frankly. This article also appeared in the MHMerchandiser. I’ve spoken with MHMSM.com’s publisher Tony Kovach and we have agreed to do an updated version of that article for his June issue on this web site, so please watch for it to be published in about 10 days.
Again, the gist is not that specific opportunities do not exist in the industry, they do. My piece speaks to the industry as a whole industry, not as to specific opportunities therein. All of us have reasons to put a best light on our own endeavors. My pieces can be influential, with important people. I can inadvertently hurt a person’s or company’s enterprise by my remarks. That is why many would rather I keep it to myself, and I often do pull my punches.
People will react to that. One alludes that I’ve lost track of LLCs as I no longer have any. I still have an LLC, WITHOUT any debt. But even if I had none, I would look to a projected 40,000 2011 annual home shipments with not more than 10,000 going into LLCs today and the frequent emails I get from repo specialists for troubled LLCs, almost daily. And I would further look to rent-to-destroy, buy here-default here, and my favorite, LLC apartments. Does this all mean nothing? Are these good trends? Is this what will save a good industry, or even individual situations, or are these merely holding actions? Does one need to jump off a roof to know it will hurt? Did the 20 years of owning 1,600 LLC home sites by myself teach me nothing? I guess so.
One of my respondents just penned a piece on his blog on the rate and cost difference between buying MH and site built housing. Wow! How timely. I sent him a detailed example of the matter at least a year ago, but more importantly, wrote a piece on the matter in the MHMerch in January 2001. “Differentials.” Guess I was behind the curve on that one, eh? But hell, the fact one can buy a $122,000 site built for the same costs as a $65,000 MH shouldn’t be a problem, should it? How do you fix that one? I’m not sure my solutions extend to that.
The image campaign rhetoric heating up again? In Oct ’08 I wrote a major article on this for the MHMerch exploring the reasons why it was needed. “The Industry Campaign: needed or extravagance?” I came down squarely on the absolute need. The industry passed on my suggestions. We traded the dollars saved on the image campaign for a minus 80,000 annual home shipments from the time of my article to the present. Now, . . . that IS penny wise and pound foolish. I also railed endlessly about it in my newsletters. Even I got tired of hearing it.
Just as the stock market should be viewed in light of the attractiveness of some individual stocks, not as a whole stock market, so I understand some folks are doing well, or at least surviving, but I stand by the statements I made in the piece. Seems some of the folks do not really believe in Marty’s prime dictum, though. For those who forgot: Forget what people are saying, watch what is happening. And what people are saying is things aren’t that bad cause some are doing well. What is happening is we’ve lost 90% of our industry. Please do not bore me with individual tales of success made by respondents to my article, who were either incapable of critical thought, or unable to speak the truth about the TOTAL and general industry condition, and which is the subject of “Oblivion.”
I lost my old friend, Dan Mendl last week, as he did not quite reach 81 years. Thinking back, I well remember his asking me where the people in business over 60 years of age were. We wandered in and out of appointments at a high clip in the late 1980’s and the 90’s, and at his 60+ years of age, we rarely met another older than Dan. Now that I’ve settled into 68 years, I’m beginning to understand. It gets wearing to hear the same solutions I heard in the 70’s, then the 1980’s, carrying into the 1990’s, sliding into most of the early 2000’s, but most not adopted, or even tried. Nothing changes in spite of the blather. You just tire of the same crapiola, presented as though it’s new. The one thing lenders knew how to do, and it has saved the few remainders: tighten up like crazy on chattel lending guidelines.
But I’ve saved the best for last. Here is one I’ve never heard before. (I lied!) This is novel, and is the best of all the comments posted. “Where’s the industry headed? Right where financing leads us.” So far, so good, I am in complete agreement. Then he continues, “and I think that will involve a contrarian lender dusting off a business model that worked pretty well 30 years ago financing MH’s in LLC’s.”
Amazing. I was around 30 years ago, in 1981. By that time I had been in Trailerville 9 years. Since 1972 to now, my own companies have transacted over $1 billion of MH chattel paper, primarily in LLCs. Through repeated head blows I finally came to understand that the above business model does not “work pretty well” for the lender. It might have been good for the community owners, and/or the factory, and perhaps even the homeowner. For the lender, the word “disaster” generally describes the results for 99.90% of all lenders using the business model of 30 years ago. Where is this notion coming from that the model then in existence for MH lenders worked well? Nothing could be further from the truth.
Don’t believe me? Ask Paul Nichols of Vanderbilt Mortgage, or Tim Williams and Rich Ray at 21st Mortgage, or Don Glisson at Triad Financial or Abdul Rajput at USBank, or John Harcher at SACU how that lending model of 30 years ago worked. They were all there, and I could name dozens more. Incredible that people should still believe that statement!
Oh, and repo costs in land/home deals? Yeah, I’m not really up on that one, either. The fact I spent 8 years as FannieMae’s full time manufactured housing consultant all through the 2000’s as their land/home and modular portfolio rapidly grew, crashed, was fixed and then worked relatively well didn’t prepare me for the kind of problems my correspondent detailed. It all was news to me after working on a multi-billion dollar portfolio of those type loans. Who’d a guessed?
Now a whole new group of people are once again proposing many of the same old bromides to highly intractable problems. The greatest fear is not that we may not have possible solutions to our ills, but that even if we screw up the courage to try them, they may not be enough. There is a reason this is all happening, and it has nothing to do with the Aztec calendar. Forget the cheerleading, analyze industry conditions with an eye for change or we can let it all go wherever it’s meant to go, on its own. And we know it has a running start on that course. The good news being that even with 1000 annual home shipments, someone may still be doing well. I’m not sure the industry will be prospering, though. # #
MARTIN V. (MARTY) LAVIN
attorney, consultant, expert witness
practice only in factory built housing
350 Main Street Suite 100
Burlington, Vermont 05401-3413
802-660-9911 802-238-7777 cell
web site: www.martylavin.com
Editor’s Note: We have again honored the author’s request to post his article “as is.”