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Pav(leen) Thukral

What is the Manufactured Housing Market?

By | Mortgage | No Comments

Traditionally seen as undesirable, could manufactured housing be making a comeback?

Different from the pre-fab homes that dotted the landscape post-WW2, manufactured home assembly now predominantly takes place on factory lines rather than on-site. 
However, the notion that manufactured homes, or mobile homes, remain undesirable may be shifting in the new market. 
Here’s why:

As young people struggle to afford new construction houses or secondary market houses, the number of renters in the United States hits new records. An alternative to renting could be found in manufactured housing. 

Distribution of Renter in the U.S. by Age
By allowing new upgrades and the option of modular housing — manufactured housing has expanded to meet a new customer base. Beyond the ‘trailer park’ connotation, companies have begun producing models with upgrades such as french doors and granite countertops. 

In fact, the industry appears on track to produce more than 100,000 units in 2019, the highest in a decade. 

Manufactured Home Shipments Per Year

The industry could continue to improve for manufactured housing makers due to the Department of Housing and Urban Development’s announcement of plans to review regulations on manufactured houses. While no official changes have been made, the Trump administration’s previous records of removing regulations show promise that HUD will act the same. 

The advantage of regulation reform mainly presents itself in the ability to add new amenities to manufactured housing. The real test of manufactured housing lies in its ability to integrate itself into ‘acceptable’ housing for the majority of Americans. Mobile home parks are typically viewed negatively and zoning can often be difficult — which falls under state zoning laws. If zoning laws were more favorable, manufactured housing could reach beyond its traditional customer. 

What does this mean for banks and borrowers?

Another key area of development in relation to manufactured housing lies in Fannie Mae and Freddie Mac’s commitment to expand their loan purchases to include chattel loans. Chattel loans are key because many manufactured homes reside on leased land and classify as personal property rather than real estate. 

Chattel loans are typically more expensive to acquire than a traditional home mortgage due to higher rates and shorter terms. The industry-wide failure rate of non-mortgage mobile homes sits at around 28%, while the current delinquency rate of single-family mortgages sits at 3.4%. 

This suggests that borrowers financing manufactured homes are more likely to default than traditional single-family house borrowers. An additional concern that should be noted lies in the lack of secondary market value for manufactured homes. However, as credit boxes continue to expand, and the manufactured customer base changes, this may change as well; particularly for non-depositories. Within banks, manufactured housing loans help fulfill CRA requirements which makes them an asset. As banks prep for upcoming exams, they may begin to look at manufactured housing loans as potential areas to meet their mandatory CRA requirements. 

“Insufficient information and lack of access to manufactured home financing options are two negative factors that still affect the manufactured housing industry. To offset their impact, well-established industry participants, such as MHI, FHFA, CFPB and specialized lenders, will continue to develop buyer education programs and bring more financing solutions to the manufactured housing market. Considering that the secondary market for manufactured home loans is still limited, the success in meeting these objectives should have a notable positive effect on the entire industry”  – Triad

Pav(leen) Thukral serves as the Chief Executive Officer of Stackfolio. His experience stems from over 6 years of technical experience with the NSA, Bloomberg, and pattern recognition research with Thad Starner, the father of Wearables. Pav is a co-founder of Stackfolio and has steered it’s vision of transparency and market access since inception. He marries the deep technical talent at the company with the deep capital markets talent, and acts as the bridge that helps make that special magic work.
Stackfolio is an online marketplace for loan trading and participations between financial institutions. Click here to visit the Stackfolio Marketplace.

A Letter From the CEO of Stackfolio

By | Uncategorized | One Comment

Here at Stackfolio, we are tackling a BIG capital markets problem. We are taking the manual, inefficient, and humanbrokered loan trading market online. But why tackle this capital markets issue by building a technology company that partners with bankers? 

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At the start

It took a meeting in early 2015 with Bartow Morgan, the CEO of The Brand Banking Company (since merged with Renasant Bank) to discover and truly understand this massive, but inefficient market. Over 20,000 institutions participated in an almost $1 trillion annually transacted market, primarily OVER THE PHONE. This reality left bankers facing two major problems.

First, Bartow, like many bankers, faced a problem that almost every financial institution faces in some shape or another: liquidity. As he noted then, “For Brand, when we originate large numbers of loans in a given month, our machinery can stop if we don’t find proper exit liquidity on those loans.”

Second, the lack of efficiency in trading…

As engineers that grew up in the age of the internet, we were awestruck.

The market was almost 100% human brokered and operated as a limited circle of contacts that sourced liquidity by calling up bankers to trade. And the vehicle for these transactions was a phone and snail-mail. The most state of the art operation that we could find was sending a physical hard drive of loan docs via FedEx.

Our team knew there was no way that this market wouldn’t move online. So we got busy building. 

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The New Marketplace

However, we just weren’t doing the best we could for our clients to be able to find and explore these opportunities.

So we’ve built a system for putting the right opportunities in front of the right institutions, at the right time. And we’ve understood that we have to combine a great Marketplace product, extremely integrated customer service, data, and an obsession on experience and speed

You can now find what you’re looking for on Stackfolio in seconds. We put the most important Stip criteria right at your fingertips. Every asset and demand is geographically qualified. The most important portfolio level information is not only available up front, but there is also no pay wall or sign up wall in front of it. The experience is completely optimized on all devices. 

 

“… there is also no pay wall or sign up wall in front of it.”

 

And we’re not going to stop there. We’re building tools to increase historical pricing transparency, a full suite of due diligence products, and a communication infrastructure that will make trading more and more seamless

As we continue our journey here at Stackfolio, I have only one request: please enjoy our new Marketplace and provide your feedback at the bottom right of every page of the product, to a real team member. 

Sincerely,

Pav(leen) Thukral

Founder/CEO @ Stackfolio

What we built

In December of 2016, Stackfolio launched publicly to the market. The response was better than we could have hoped for. In just under a year, we had almost 500 institutions sign on to the Stackfolio platform, had almost $1 billion in listings, and were on our way to creating true liquidity. We raised a round of capital around this growth at the end of 2017 and started to ramp up as a company. We’re pretty proud of where we landed. 

Today, we have nearly 800 institutions from all 50 states and almost $3 billion of listings on our marketplace, with loans listed across every major asset category and across every geography.

 

“… $3 Billion of listings on our marketplace, nearly 800 institutions from all 50 states…”

 

That growth led to a problem; our favorite kind of problem. Our Marketplace product wasn’t keeping up with the growth. We were constantly getting support questions from our customers being overwhelmed with the number of listings they were seeing and that searching through them wasn’t easy. We were very grateful to have this problem, but we had to fix it. 

The team went back to the whiteboard because it didn’t view this as a simple matter of creating more filters or separating things into categories. Stackfolio is not an e-commerce platform for mugs not that that’s not a great business! We’re an online marketplace for very complicated financial asset transactions

There is a lot of nuance in the loan trading business with our customers facing unique challenges, such as qualifying credit underwriting guides, building unique investment strategies around borrower information, managing different investment timelines, and balancing regulatory requirements. Stackfolio has and continues to help financial institutions with these challenges. 

For example, many institutions come to the Marketplace to help meet Community Reinvestment Act (CRA) lending requirements. Many come to strategically fill gaps in their loan growth/origination goals. While others utilize Stackfolio to appease regulators when they hit liquidity constrains like their CRE/Cap thresholds. 

Our institutional buy side clients have their own unique struggles as well. There is massive pressure for asset class diversification, while at the same time they are being hit with fee compression from all sides. Stackfolio is helping solve for this.

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