Has any park owner that has used the 21st Cash program had a consumer loan default? The latest version of their docs appears to give 21st full discretion on whether they re-originate a loan to the park owner, or alternatively, demand full repayment. This is a bit unsettling, as we don’t know whether we need to establish a reserve account or not.
Any firsthand account from a park owner about how 21st deals with these situations would be appreciated
It would seem to defeat the purpose of using the Cash program if we need to have a reserve account for the full amount of the home and installation cost.
Thanks rmpratt. Those options sound great, but the language in the Cash agreement gives the bank full discretion on which of those options will be made available. There are no assurances that 21st will provide those options to you - unless their latest program provides that (i signed up in April 2017). What version Cash program are you using? Thanks
@rmpratt , as per your post:
“When a default occurs you now have 3 options with 21st:
1.) Repay balance in full
2.) Convert home to a commercial note (They will finance 100% of invoice, but won’t cover set-up costs) and use it as a rental / rent credit unit
3.) Floorplan it for 6 months (They hold it on their balance sheet) until it’s ready to sell and sell it as a used unit”
@jkmhp2 , as per your post:
"Those options sound great, but the language in the Cash agreement gives the bank full discretion on which of those options will be made available. There are no assurances that 21st will provide those options to you - unless their latest program provides that (i signed up in April 2017). "
So I am very conservative…and these options sound like a lot of risk to the MHP Owner and very little risk to the CASH Program.
Has any MHP Owner had a CASH Program Mobile Home default?
If yes, what was the result?
Has any MHP Owner sold a MHP with CASH Program Mobile Homes?
If yes, how was the sale structured? Did the New MHP Owner take over responsibility for the CASH Program Mobile Homes /or/ are they still in your Business Name?
The 3 options outlined above are for the CASH program as of August 2017.
I’m with you on the recourse, I wish it weren’t part of the program but it comes down to math. After a lengthy discussion with the head of the CASH program it became clear to me why they have to make it a recourse deal. In order for 21st to cover their losses on defaults if they did a non-recourse deal they would need to charge 16% interest. However, Dodd-Frank makes this illegal (They are capped out at something in the 10-11% range). That means they need to find another mechanism to cover the losses and recourse is what they came up with. It is basically that 5-6% interest rate spread that park-owners are subsidizing when they co-sign on these homes.
As far as impact that CASH homes have on park liquidity, we recently sold a park with about 10 CASH homes in it. We were upfront in our marketing that the sale was contingent on buyer taking over responsibility for CASH homes in the event of a default by transferring them out of our name and into theirs. This request seemed to have no impact on the transaction - we had multiple offers at or near our list price.
It’s not a perfect program, but used wisely CASH can be a nice tool to your infilling toolbox.