It is hard to stay focused on business when the aftermath of hurricane Katrina reminds us how fragile life is and how good most of us have it.  The challenges we face are trivial by comparison, but nevertheless, life does go on for most of us and there is much to talk about in manufactured housing these days.  But first ---
 
The Manufactured Housing Institute (MHI) and The Federal Emergency Management Agency (FEMA) are working together to locate and transport immediately available single section manufactured homes to areas affected by hurricane Katrina.  FEMA wants to purchase hundreds if not thousands of homes that can quickly be placed as temporary housing for those who are now homeless as a result of the devastation.  For more information on this effort and how you can help contact MHI at www.manufacturedhousing.org or the direct link for FEMA information and their exact criteria is:
 
FEMA info and criteria
 
In other news, we are hearing and seeing so many contradictory practices as it relates to financing manufactured homes these days it motivated me to ask this question of our lenders, both chattel and real-property mortgage.  Just exactly what will it take to get interest rates and loan conditions down to a reasonable level?  Is it shorter loan terms?  Is it larger minimum down payments in order to lessen your risk and increase the buyer’s equity?  Is it long term leases from manufactured home rental communities?  If Fannie Mae and Freddie Mac would more readily buy your chattel loans at the same rate they buy conventional mortgage loans would that do it?  Is mandatory escrow closing what you need for more transparency?  
 
As I go around the Pacific Northwest talking with homeowners in our communities I am constantly asked the same question and the question hasn’t changed much over the years.  Why are manufactured home loans at such a high interest rate?  Yes, I know, its primarily about the risk and default rate as compared to other types of loans, but when you stop and compare we have higher interest rates than conventional stick-built homes, cars, boats, RV’s. most credit cards, home equity loans, educational loans, personal unsecured lines of credit and more.  Is our collateral really that bad compared to these other financial instruments?  No, it isn’t.  It’s the process that is bad.  The homes are great but the process for sales, delivery, installation and customer care are so bad it’s driving down the value of the home, discouraging new buyers from purchasing our product and turning off most mainstream financial institutions.  For decades this has been the “elephant in the living room” with only people like Gub Mix and Marty Lavin addressing this issue head-on.  When will we learn and change?
 
A year or two ago we were promoting the exciting new Freddie Mac long term leasehold program that brought lower interest rates to home buyers when their land-lease community would sign the Freddie Mac lease, which ran 5 years longer than the term of the loan (up to 35 years).  It effectively gave the homeowner a real property interest that allowed the home to be considered real property instead of personal property.  Some community owners embraced this program while many resisted signing the daunting 48 page lease agreement.  Well, a new complication has arisen.  As  a few of these communities with the Freddie Mac lease are selling, lenders financing the community for the new investor are not making the loans because Fannie Mae (who will buy that commercial mortgage once the sale closes) doesn’t like some of the conditions of the lease!  Imagine, long term leases that finally gave some guarantees and stability to land lease communities and Fannie Mae inadvertently has created a roadblock that makes this program appear even more controversial.  Who would have thought.
 
Manufactured home land-lease communities are closing all over the country, as the land beneath them has in some instances become more valuable than the community itself.  Newspaper articles in Arizona, Nevada, Oregon, Washington and Florida have reported many such incidences and in Oregon local television stations have ran numerous stories on this phenomenon.  In some cases home builders have offered millions of dollars more for a community just to get the land, and once the purchase closes they immediately start the “park closure” process. 
 
Homeowners have 365 days to move in Oregon and the law does not allow for mandatory compensation for the homeowners unless they are given between 180 and 364 days to move.  A new bill, HB2389 does give homeowners up to a $10,000 tax credit and offers incentives to community owners who will sell the community to the residents instead of an outside developer.  It also loosens regulations on movement of older homes when those homes are coming from communities under closure.  It is too soon to tell how effective this legislation will be, but it’s a good start in the right direction.  
 
We are torn apart by this issue.  Land owners clearly have the right to do what they want with their land, but it’s hard not to have sympathy for these people, many of whom are either older and find moving extremely difficult, or those who moved into these communities in the past six to eight years and paid “park packages” up to $25,000 or more that are useless to them now.  You can thank the land use planners for not seeing this trend coming and neglecting the high demand for developable land, forcing developers to target occupied property for re-development to a different use.  We are keeping a close eye on this issue and will report back to you as things change.
 
I am excited to attend George Allen’s International Networking Roundtable in Amelia Island, Florida this week.  Nearly 200 community owners and managers from around the country attend this event and I expect to learn a great deal about what’s going on in our industry around the nation.  I will share the insights of the other attendees upon my return.
 
Finally, don’t forget to SAVE THE DATE!  Our Oregon/Washington Manufactured Housing Industry Summit is coming up Wednesday, January 18, 2005 in Portland.  This will be, by far, the best and most exciting Summit ever.  You can look forward to a new format, new presenters, and more exhibitors.  For more information and registration information visit our website at www.cwres.com. 
 
Thank you for taking a few minutes to read this Industry Update.  If you wish to contribute to Katrina relief, experts suggest its best to donate money to the Red Cross.  You can contact them at:
 
American Red Cross
PO Box 37243
Washington, DC 20013
(800) HELP-NOW
www.redcross.org

Greg Harmon - President
Commonwealth Real Estate Services
E-mail: greg@cwres.com
Telephone 503.244.2300 Ext. 101