Credit restrictions cut LV manufactured home sales

Chris Jones

Wednesday, April 24, 2002 | 11:12 a.m.

Manufactured home sales in Southern Nevada have tumbled in recent years, thanks in part to credit restrictions that have prevented many would-be buyers from receiving loans.

Last year, 1,086 new "chattel homes" -- manufactured homes sold without accompanying property -- were purchased by Nevada residents, according to statistics compiled from state records by the Nevada Manufactured Housing Association.

That's a decline from the previous year, when 1,350 such homes were sold. And it's far below the 2,341 new manufactured homes purchased by Nevadans in 1999, said Gub Mix, executive director of the NMHA.

Nevada's situation mirrors a national trend, Mix said. He blames declining sales on the industry's top finance companies, which have collectively toughened their lending standards after many loans issued in the late 1990s went bad.

"As recently as 1999, lenders were very competitive and were not using good underwriting criteria," Mix said. "They were loaning money to a lot of people who shouldn't have been buying homes, which resulted in the repossession of a lot of chattel homes."

A glut has flooded the market. Joyce Duvall, general manager for Nationwide Homes in Las Vegas, said there are currently hundreds of repossessed homes for sale in Southern Nevada.

"There were some bad business practices going on and this whole industry has suffered for it," Duvall said. "It gives all of us a bad name."

While the precise number of repossessed manufactured homes in the United States is unavailable, the Manufactured Housing Institute, a Virginia-based trade group, projects between 90,000 to 100,000 repossessed chattel homes will be sold in the United States this year, said Bruce Savage, vice president with MHI.

"As a result of those repossessions, (lenders) are probably being a little too cautious and it's had a tremendous impact on borrowers' ability to get a loan," Mix said.

Unlike traditional single-family home sales that rely largely on banks and mortgage companies to loan money to borrowers, the bulk of chattel home deals are financed through specialized companies that deal only with manufactured home buyers.

While Mix said sales of manufactured homes with land -- where loans closely resemble those used for traditional homes -- have remained steady, the same cannot be said of chattel homes, which lenders classify as personal property similar to an automobile or boat.

During a panel discussion at the 2002 National Manufactured Housing Congress & Expo April 2-4 at Paris Las Vegas, spokesmen for some of the industry's top lenders acknowledged credit restrictions have hurt the chattel home market across the United States.

"We see an industry that has had its problems over the last three years," said Ron Klein, chief executive officer of Origen Financial LLC, a Glen Allen, Va.-based lender that specializes in manufactured home loans. "We're losing ground ... primarily due to troubles with financing."

Kevin Clayton, president & CEO of Clayton Homes Inc. and Vanderbuilt Mortgage & Finance Inc., added those manufactured home buyers who can find willing lenders are often forced to pay more for their loans.

"(Manufactured) home values are going down, which has tightened available credit and raised interest rates on loans," said Clayton, whose Maryville, Tenn.-based Clayton Homes is a leading builder and seller of manufactured homes; Vanderbilt Mortgage and Finance Inc. is its internal financial division.

Duvall said such actions are hurting low- and mid-income buyers who can't afford to purchase a traditional home.

"Manufactured homes used to be a place where people could go to make a start, but now it's as if you have to have perfect credit or a lot of cash to get in the door," Duvall said. "For a lot of people, that's just not going to happen."

Credit problems nearly stopped Henderson residents Wayne and Elaine Willett from purchasing a new chattel home, Wayne Willett said.

"We didn't want to put a lot of money into a house and manufactured homes were nice and something we could afford during retirement," said Willett, who expects to move into his new chattel home in late June. "Our sales person worked with us to secure a lender, but we had been turned down before because of problems with my credit."

With lenders unlikely to lower their loan standards in the near future, Mix said it's now up to retailers to adjust their marketing practices. He said many Nevada companies have already taken such steps and have reported significant progress.

"Over the past five months, chattel home sales in Nevada have increased by 40 percent compared to the same period one year ago," Mix said. "(Sales) figures are about half of what we used to do, but we're seeing an improved situation."

Mix credits those changes to retailers' efforts to seek out better buyers.

"Everyone now understands a buyer has to have a credit worthiness," Mix said. "(Qualified buyers) are out there, but you just have to work for them. I think our people are doing a better job of finding them, whereas before they could just sell to anyone who walked in the door."

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