1	Personal Property Lending Panel Moderator: Marty Lavin Speakers: Don Glisson, Jr. Andy Griggs Ron Klein Tim Williams
2	Historically, Manufactured Homes Were Financed as Chattel 75-85% Chattel Real Estate-secured gaining favor
3	Industry Activity Since 1990 Ramp up in early 1990s GreenTree Financial leads with ABS Very high home sales volume in mid 90s Late 1990s volume drop Early 2000s serious pull back Mid 2000s leveling off
4	Why Is Money Hard to Find For Chattel Lending? FICO Tiers Charge offs Land-lease Communities
5	Chattel Activity Fairly Constant in Middle 2000s Little volume growth New lenders enter Attractiveness of other financing forms and their competition
6	Regaining Chattel Preponderance Our panel covers all the funding sources of chattel money: Banks Credit Unions ABS Internal Funds The intent of this panel is to discuss the present state of availability of money to fund chattel loans.
7	Introduction of Panel Members Don Glisson, Jr. – Triad Financial Services, Inc. Andy Griggs, CU Factory Built Lending Ron Klein, Origen Financial Tim Williams, 21^st Mortgage Corp.
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9	"5 Time MHI" 5 Time MHI Regional Lender of the Year presented by Don Glisson, Jr., President/CEO
10	Triad Financial Services Overview Established 1959 Prime credit specialists Office locations: Jacksonville, FL (headquarters) Bourbonnais, IL Houston, TX Western US Office TBA 3rd Quarter 2006 Conducting business in 39 states
11	2005 Results Amount Financed increased 29% Down Payments Averaged 17% FICO scores Averaged Over 700 Delinquency less than 2% 1^st Quarter 2006 Amount Financed up 55% !!
12	2006 Industry Overview New Home shipments 125,000 – 130,000 by our Estimation New Home market $8.4 billion Resale Home market 650,000-675,000 homes Resale market dollar value: $22.5 billion Resale Market Underserved even though it exceeds New Home Volume
13	Triad: From Dictionary.com “A Group of Three”
14	How Our “Triad” Helps the Industry Sell Chattel Financed Homes
15	How Triad Keeps the Money Flowing
16	Triad and Our Investors
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18	Marketing Manufactured Homes to Investors: The Credit Union Perspective Andy Griggs, Director of Strategic Developments CU Factory Built Lending, L.P.
19	Setting New Perceptions for Manufactured Homes Improving the performance and perception of chattel secured manufactured home loans: It is all about a stable and predictable ROA (Return on Assets) Exit strategy must not be a lose-lose
20	Return on Assets ROA is a function of: Net interest income, and Operating expenses, and Charge-offs ROA target or premium for an asset class is a function of: Historical performance of asset, and Credit risk (perceived and real), and Hassle factor
21	Credit Risk = Default Frequency Loan Attributes Credit score Location of Home Equity Advance Rates New/Used Loan Terms Documentation Market attributes Satisfaction with homes performance “Appeal” of Home Buyer/Community Commitment Loss Severity Disorganized and Fragmented Resale Market Integrity of Collateral Data
22	Credit Union Industry Overview Assets >$700 Billion Membership > $ 85 Million Capital > $ 75 Billion RE 1^st Mortgages >$135 Billion Auto Loans >$160 Billion HELOCS > 36 Billion Yield on Average Assets 5.75% ROA .95% Loan to Share 73% Net Interest Margin 3.30% Charge-Offs .40% # of Credit Unions over $1 Billion in Assets 94 # of Credit Unions with assets of 250 million - $1 Billion 424
23	CUFBL Loan Performance
24	Comparative Credit Score Stratification
25	National vs. CUFBL Comparative Income Profile
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27	Why high interest rates cannot offset lending to weak credit borrowers: Let’s look at the following three examples: Each example has the following constants: Each is over a 3 year average The average outstanding balance over a 3 year period is $275,000,000 Default rate is for the weighted life of loan pool The cost of funds is 5%
28	Example One
29	Example One Continued
30	Example Two
31	Example Two Continued
32	Example Three
33	Example Three Continued
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35	Who Is Origen?
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37	How Does Securitization Work?
38	What Are The Challenges of Securitizing MH?
39	Why Did MH Loans Go Bad? Over Advanced Too Much House Long Terms Buydown Points Poor Quality Product Poor Service Poor Installation Over-Priced Options Financed Insurance, Credit Life, “Extras” No Verification of Customer Info-i.e. Insufficient Income
40	Anatomy of Loss
41	Performance Trends
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43	A Sample Deal $175,000,000 in loans, $156,187,000 sold as bonds, $19,000,000 as OC Bond Pricing 1 yr. AAA 5.50% 3 yr. AAA 5.80% 5 yr. AAA 6.00% 10 yr. AAA 6.50% AA 7.00% A 7.50% BBB 8.00% OC = 11.00% COF = 6.2% Leverage = 8X
44	Cost Of Funds
45	How Can Origen Improve Our Leverage?
46	How Can We Buy More, Lower Rates, & Save the World? Re-Establish MH as a Performing Asset Class Out-Perform Expectations Create Value for Borrowers Keep the Borrower’s Interest in Mind
47	Keys to Improving MH Securitization Performance History and Data Data driven underwriting, performance monitored and adjustments made DAILY Transparency of Information Loan level data and performance publicly available on website Integrity in the Process Loan structure – shorter terms, lower LTI, no “Air” Verification and validation of information – VOI, VOE, VOD Source diligence, fraud checks and audit feedback Servicing know-how and execution Customer NEEDS Real Value in Their Home!
48	“What If” Better Leverage Leads to Higher Returns
49	Positive Trends Origen’s Demonstrated Performance Has Already Allowed Us To: Improve Leverage Narrow Spreads Reduce Rates, Lower Rates Even More for Better Credits Increase Approval Percentage Offer New, Innovative Products Gain Credibility With Investors
50	Division Clayton Homes Inc. A Berkshire Hathaway Company
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54	"Clayton borrows money from Berkshire" Clayton borrows money from Berkshire, which in turn borrows the same amount publicly. For the use of its credit, Berkshire charges Clayton a one percentage-point markup on its borrowing cost. In 2005, the cost to Clayton for this arrangement was $83 million.
55	What we do at 21^st Mortgage? Finance Inventory ($200 Million) Originate loans-Nationwide Direct Broker Indirect (Retailer) Portfolios Land/home (single close and stage funding) Service loans Insurance Liquidate repossessions
56	21^st Mortgage Pricing 21^st estimates its cost of funds each month as if BRK was issuing new bonds each month Every loan product has the same money cost regardless of credit quality Each loan product has its own unique risk premium based upon default frequency and loss severity ratio Servicing costs also vary by loan quality and loan size
57	Risk Modeling Annual analysis of 100,000 loans Default frequency Credit score Equity Home Placement Home type Prepay frequency
58	Cumulative Repossession rate, Park vs Non-Park, 95% LTV
59	"Other rate factors" Other rate factors Home type- SW, DW, Age Location – Land/home, Private property Community Community Attributes and Agreements