1	Manufactured Housing Lending in Communities Marty Lavin, Tim Williams, Jeff Mouat
2	The Industry Pullbacks High volume periods, then peaks followed by a crash During crash better lending and better types of loans more loans with real estate more loans on private property many fewer loans in communities result much higher credit with better execution
3	Funding Sources 1960’s and 1970’s – till ’73 Virtually every bank involved (52% of all new housing starts) Then crash, and GECC and S & L’s till late 1980’s Then crash, and ABS markets start in 1987 Crash and no new source in sight for money Who will be next? (125,000 annual shipments now)
4	Will GSE’s Become a Source? Tremendous liquidity and clout Know how to really study problem Very adverse to losses, already lost their naivete, and won’t reenter without changes (Conseco bonds handled that)
5	ABS and the Markets Tremendous losses Now know the facts and learning more Less risk adverse than GSE’s, but will want similar protections, still perceive many problems Probably will partner with GSE’s, which would provide substantial increased liquidity Both have lost their MH naivete
6	How does this Affect Community Lending? Home depreciation greatest in communities Highest percentage of total repos are in communities and greatest severity Lenders and community owners have not always been friends in downturns or defaults Today lenders highly wary of in-community loans I estimate 100,000 – 125,000 homes of in-community chattel loans not being done at present
7	Depreciation in Communities is the Enemy High gross – low volume sales model industry standard Comunities as a housing option in given markets Leasehold rents pricing policies in communities Know the rules for pricing your rents what is your competition? Apts and other housing, other community rents mortgage payment needs, or replacement costs may be inadequate measures for community owners vacancies mean something
8	Measures Industry Lenders Push and Need to Stem Depreciation CAS – Community Attribute System Invoice database, IBTS MHI database Shorter repayment term. Reduced gross profit at sale Better installation performance Better and longer home warranties * Greater resident lease protection MSRP Forming much better resale network TIPS LBP MARI Community Owners/Lenders Agreement
9	"21st Mortgage Programs and Comments..." 21st Mortgage Programs and Comments – Tim Williams
10	"Origen Financial Programs and Comments..." Origen Financial Programs and Comments – Jeff Mouat
11	"Q & A" Q & A
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13	Company History 9/1995 - 21^st begin with 4 employees 9/1998 - Tighter underwriting EVA 6/2000 - Buyout AHS/CMH 50% investor 12/2001 - Buy Assoc. portfolio 9/2003 - BRK buys Clayton 12/2003 - Clayton buys 21^st mortgage
14	Why did they quit? Access Associates BankAmerica Belgravia Bombardier Burgin Chase CIT
15	What didn’t they understand? Differentiation among score ranges Importance of Equity Repossession loss curve Significance of home location
16	95% LTV Repossession History
17	95% LTV Repo Frequency by Scores Range
18	95% LTV Repo frequency of Loans Outstanding
19	95% LTV by Score Range, Ignore prepayment
20	95% LTV by Score Range After Prepayment
21	90% LTV Repo Frequency of Loans Outstanding
22	Repossession Rate by Credit Score and Down Payment
23	Private property loans score 600-650
24	Communities loans score 600 – 650
25	Reason for poor performance Community incentives reduce equity Premature decline in housing Value Value determined by total housing cost Home payment + site rent Relative to alternatives Alternatives = Apartments, site built and other communities
26	Value deterioration Assume site rent at inception = $300 $35,000 home 5% down = $385 Total housing payment = $685 Alternative site built @ 6% = $114,000
27	Assume $100 site rent increase
28	Customer Alternatives Can’t sell? Pay higher rent on home with $10,000 less value Pride of ownership declines Real depreciation becomes evident Customers are trapped Only exit is Repossession
29	Lender Solution Limit exposure to only high equity customers and best credit customers Customize plans for certain communities Differentiation among communities
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31	Origen Financial LLC Completed $64MM IPO in May ’04 Completed $150MM 144A equity raise and converted to a Mortgage REIT in October ’03; followed by an additional $10MM private placement in Feb ’04 Maintained servicing portfolio of approx. $1.3B, while originating almost $410MM since January Selected as 1 of 9 lenders from Fannie Mae MH Initiative Received the MHI 2004 Lender of Year Award
32	What We Originate Home Only (93.64%) Land Home (6.36%) Comparable Appraisal (16.63%) Buy For Program (6.04%) Secondary Homes (2.78%)
33	Portfolio Changes
34	"Community Approval Program"
35	"Community Approval Program"
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37	"Comparable Appraisal Community Program"
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39	Differentiation Amongst Communities Community Attribute System Attributes have a 1 to 5 weight Separated Into Three Major Categories Management/ Infrastructure/ Economic Attributes Community Features/ Amenity Attributes Home Activity/ Resale Market Attributes
40	Management/ Infrastructure/ Economic Attributes Lot Lease History Vacancy Rate Rent Control Local Attributes (schools, shopping, location, etc…) County Unemployment Comparable Apartments
41	Community Features/ Amenity Attributes Community Appearance Age of Homes Types of homes Community Amenities
42	Home Activity/ Resale Market Attributes Average Selling Price (new and used) Frequency of Repossessions Days on Market Resale Market
43	Top 10 - Total Score
44	Top 10 - Feasibility
45	Top 10 – Attributes Impact
46	MHI Community Agreement Agreement between Community Owner and Lender that explains who is responsible for what in the event of a repossession
47	MHI Agreement Highlights Lender doesn’t pay back lot rent Lender is allowed 12 months to resale home in community without paying rent if the community has a vacancy greater than 5% Lender must bring home up to community standards within 60 days If home is to be sold wholesale, Lender shall negotiate exclusively with Community Operator for the sale of the Home for 30 days
48	Thank You!