21st Mortgage question

mobile home university
#1

I just got my dealer’s license and am already approved through one manufacturer. I talked to 21st about their CRP program where I have to buy 3 homes per year. One couple in the park has designed their home and gotten an invoice for $30K and I was hoping to put them into the home via a rent-to-own arrangement. When I asked 21st to give me a breakdown on how much their costs would be and how all the numbers would work out, I was met with deafening silence. They sent me some marketing materials that talk about their various programs, but they refuse to give me hard numbers on my particular situation.

Couple of questions:

  1. Is this what is like to do business with them? It seems like they should be a little more helpful.

  2. If anyone has had experience with the CRP program, can you give me any idea of how much I can expect their costs to be? If the invoice is $30K, how much do they add on?

My manager attended an industry event for dealers and park owners and not one person in the room had anything good to say about 21st. They did business with them, but nobody liked the process. Is this true? I am concerned that if much bigger operators had such problems, mine will be even worse.

Thanks.

#2

I don’t see how they could give you hard numbers, since if you do a rent to own for awhile and then have the tenant buy the home in the future after enough time has passed, there is no way 21st could know what the condition of the (now used) home will be in, or what it’s future value will be or what interest rates will be, or all the other variables.

When I have talked to them they have given me the current terms on their various loan programs, but I can understand why they will not give hard numbers on a home sale off some years into the future.

#3

I am not being clear. On their materials detailing the CASH program, they talk about various costs such as “CASH margin and taxes” that get added to the loan and such things as “5% fee plus carry plus carry costs will be calculated and deducted from seller’s margin and paid to 21st Communities” and “1-3 points financed into operator’s loan”, etc. These look they could add up pretty quickly and that is what I am trying to figure out. I do not understand what these costs are and I am hesitant about making any commitment to buy something when I don’t know the final price.

Has anyone bought a home through their Community Rental Program and been through this?

Thanks.

#4

Just got off the phone with the rep and finally got some info that I can use. The specifics of the fees (lots) I frankly did not understand. What I did understand is that I am responsible for the onsite costs and they pay for everything else. The easiest way for me to understand all this is take the invoice, add in the shipping (but not onsite costs), and then increase that amount by 10% to cover 21st’s fees. This is the amount that gets financed for 10 years.

I can see that the first one is going to be a real thrill, but future transactions will probably get easier.

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#5

The material they sent me, including a spreadsheet for estimating the expenses, was for 15 year mortgages. I thought that would be a tough sale in my parks and started looking into different options for filling my parks than the CASH program.

Another thing I did not like about the 15 year mortgage was since I have to co-sign the loan I would also be on the hook for 15 years. And what if I want to sell the park during that time? A lot can change over that period an it just seemed kind of risky. For example what are the odds that we can go 15 years without some kind of huge financial disaster? Jeesh, I would not want to bet my egg nest on there being nothing but smooth sailing.

10 years is not nearly as bad, the principal drops much faster. If I carry the paper myself, I can get it done in 5 - 6 years, but of course that option has its own issues.

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#6

Oops, my bad. I am getting confused regarding the different programs and there is a difference between the terms for the community rental program and the straight purchase/consumer finance program. I read the fine print more carefully for the program that finances the consumer and the term for this loan amount would be 15 years. It also says that I have to buy the home back at any time it gets repoed for the unpaid loan balance.

Hmmmm. There are advantages and disadvantages to each program. I can’t help but think that I am going to get the short end of the stick if a deal goes south no matter which way I go. One bad transaction could financially kill me.

#7

Randy,

I have been thinking all morning about what wrote and I think I finally understand it. Tell me if I am right: With any product under the CASH program, I as the park owner am ultimately liable for the performance of the loan. If I do the rental program, I actually own the home. If 21st finances the home for the buyer, then I have to buy the home back for the unpaid balance if they don’t pay. Given a 15 year term, the principle reduction is very slow and I could wind up paying way more than the home is worth. There is also that nagging problem of being liable even after I sell the park. Is this what you were driving at in your post?

Frankly, I am getting worried. I could probably handle one buyback, but certainly not more than one. Having a bunch of these in the park and the economy turning south like 2008 sounds like a disaster for a small operator. Someone with deeper pockets could weather a storm like this, but I could not.

I am thinking about selling new homes at my cost (21st certainly drives up the cost with all their fees and mandatory 10% margin) and maybe even give the buyers a break in the lot rent. Buyers must obtain their own financing completely independent of me. I could even let buyers design their own home, pay for it myself, and then sell them exactly what they want at a price nobody could ever beat. Their financing would pay me off and then I would do the process all over again. If you can see problems with this approach, I would appreciate your input.

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#8

As I understand it, you are the buyer’s rich uncle who co-signs the mortgage with them because their credit is so bad, the bank will not lend to them.

As a co-signer you don’t own the home but you are on the hook in case the buyers (now the owners) stop paying. My understanding is, when that happens, you just keep making the payments and somehow kick the owners out and take ownership of the home. Maybe some one here can explain how that works. Once that is done – and how long it would take, I don’t know – you can then sell the home and the new buyers pick up the payments.

I need to go back and listen again to the 21st Mort. webinar from a few years ago. Back then the program looked pretty good. It was just a 10 year program and the cost of a 3br 2ba home was $25k or so (as I remember.) As owners we had to throw $5k into the deal but 21st would lend the money it would cost something like $120/ month for 5 years.

But for the Save Act, you could budget $20k to move in a nice used home and sell it at cost with $3k down and a loan of $17k 4%, 5 years with a payment of $313. If you want your cash back quicker, after a year of servicing the note, you could sell it to an investor with 8% return by just discounting it $1,041. That would be a deal I would have no problem guaranteeing to the investor.

I saw that idiot Chris Dodd on TV tonight. I almost threw my shoe at it.

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#9

Randy,

Your numbers for a good used home are almost the exact same as what I came up with. Amazing.

I would really like to see someone who understands the CASH program explain the park owner’s liability if a buyer goes south. Lots of talk how this program can benefit park owners, but I don’t see any info about what can/will happen to us when another 2008 scenario hits. This program has never gone through an economic downturn, so maybe no-one can really say what will happen.

Anyone out there care to address our concerns?

#10

@Rolf , as per your post:

  • “21st Mortgage question”
  • “I just got my dealer’s license and am already approved through one manufacturer. I talked to 21st about their CRP program where I have to buy 3 homes per year.”
  • “When I asked 21st to give me a breakdown on how much their costs would be and how all the numbers would work out, I was met with deafening silence.”
  • “1. Is this what is like to do business with them?”

We have done business with 21st Mortgage by purchasing a repo Mobile Home. Thankfully, our deal was clean and quick. We negotiated the Purchase Price of X (no extraneous fees), paid X and received a Mobile Home Title.

Now as per the 21st Mortgage CASH Program (based on my understanding of the Program) I am not a fan as I am extremely conservative.

I do not want to be held responsible for 15 years for a MH mortgage based on other people’s monetary behavior.

It also seems that the 21st Mortgage CASH Program’s “additional fees” are very high.

I would much rather be a MH Dealer and buy directly from the MH Factory using Cash.

Yes…with Cash I would not be able to buy as many Mobile Homes.

However, I would also have the peace of mind that I own the MHs outright and could sell them to Tenants or sell them with the MHP (if need be).

Under the 21st Mortgage CASH Program I cannot imagine a MHP Buyer who would desire to take over “responsibility” of all the existing 21st Mortgage CASH Program Mobile Homes.

  • Has anyone actually sold a MHP where you as the Owner was responsible for 21st Mortgage CASH Program Mobile Homes?

  • If yes to the above, how was your Transaction to sell the MHP structured?

#11

Kristin,

Thank you for your thoughts. I, too, am starting to get a lot more conservative and have come to a similar conclusion as you. Here is an idea we are tossing around with a couple of residents who have expressed an interest in buying a new home.

  1. They pick out the model they want from the manufacturer.
  2. The buyers get pre-approved for the home through a company that finances the home only - there are actually several in addition to 21st.
  3. We use our cash to pay for the home to be built and moved onto the lot.
  4. The sales price is our cost without any mark-up.
  5. Buyers complete their loan and move into the home. (We get our money back at this point.)
  6. Their old home stays in the Community and is sold to a new owner.
  7. Lot rents for the new home is $50 per month for the first year and then moves up $50 per year until it reaches what everyone else pays.

This gets me new homes into the Community without tying up my cash for a long time. The buyers are happy because they got a great deal on a home and the total (lot rent plus loan payment) is affordable. Worst case is they back out of the deal and then I sell the home. If the buyers default to the lender, I will most likely get the home.

I see the above as a win-win for everyone and I would appreciate any feedback on what I may be missing.

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#12

Interesting strategy. Anyway you can share some of the names and terms of the other financing counterparts you’re dealing with?

#13

@Rolf , as per your idea:

  • “Here is an idea we are tossing around with a couple of residents who have expressed an interest in buying a new home.”

That sounds like a great plan to me:
1.) You fill a Mobile Home Lot
2.) You make your Tenants Happy
3.) You get all your Money Back at the front from the Loan

Please let us know how it goes.

We hope that it is very successful for you, your Tenants and your Mobile Home Park!

We wish you the very best!

#14

My manager attended an event at a manufacturer and this is the list of banks he got from other dealers.

https://www.countryplaceloans.com

http://www.westernalliancebancorporation.com/alliance-association-bank-home/hoa-loans

http://northpointcf.com

https://www.mountainsidefinancial.com/

The dealers and manufacturer all dealt with 21st, but were quite vocal in their dislike for doing so. I hear lots of info about 21st’s deep pockets and the programs they offer, but nobody with whom we have ever spoken has had anything good to say about actually doing business with them. Nor has anyone ever addressed my and others’ concerns about what happens when we have to take back a home or sell a park with still unpaid CASH loans. This scares the hell out of me. I’d rather grow the park at the rate of one home per year than fill it up quickly and risk everything.

We will give this list, with 21st on it, to any resident considering buying a home. On the list will be a line something like “We do not make recommendations as to lenders.” I have also instructed my manager to not disparage 21st or anyone else. Good and bad experiences will get around the park on their own and I don’t want to open myself up to any charges of steering.

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#15

Randy_CA, please explain how Save Act influence this scenario. I am not familiar with Save Act. Thanks.