White Paper- The need for a New Model for Chattel Lending in Communities

Why the Manufactured Housing Industry Needs a New Business Model.

If you would like more information please email me at: ralphc@dominionventures.net

We have a power point presentation that goes along with this white paper.

Background: We attended our first Mobile Home Millions in 2006 after purchasing our first community of 97 sites. We currently own 8 communities and 1 self storage center totalling 1201 units. Although we wish we had been able to attend more Mobile Home millions we had our nose to the plow over the past 2 years and have been blessed in being able to apply the wisdom we have gained from many of you on this list.

Below is my attempt to share some of our limited knowledge as we have examined the needs of this industry.

I believe this information impacts the large and small community owners. If you can do seller financing you can probally fill most communities.

Your thoughts on this white paper are appreciated. This is the first time we have made it public.


Ralph Cochran

Dominion Ventures LLC


Calvin Homes, Inc

Vice President

White Paper

Co-authored by Ralph Cochran and Jim Luchs

The core weaknesses in the old model and a proposal for a stronger new model

The Need for a New Business Model

The dominant business model in the manufactured housing industry throughout the 1980

Thanks for sharing with us the recent history of the mobile home industry. I’ve only been in the business for the past 2 years as a community owner and this gives a good overview of what has happened in the past 10 years. It certainly shows why lenders treat the mobile home industry differently.


Ralph and Jim,

Though, I don’t know you, I am thrilled that you are willing to offer what appears to be a well thought out review and plan for the Mobile Home Industry. This is a great forum to discuss this in depth as there are numerous creative individuals on this board.

I have some comments and some questions:

As David said in his post, you have presented a wonderful review of the history of the Mobile Home Industry covering the most recent ten years.

You have also given a clear description of the traditional, and now, “old” model of selling mobile homes and placing them in communities.

I’m not as clear on the new model you have presented as there appear to be two parts to it, both called models: The front-end model and the back-end model. Perhaps, if I understand it, there ARE two models which can operate independently OR interdependently. Is this correct?

Also, to help me understand this (these) models, please clarify some terms for me. I believe when you say a “community dealer/lender” you are referring to what is now commonly known as a Lonnie Dealer. Is this correct? I know that this may be just semantics but many people on this forum, like me, have become Lonnie Dealers. When you say “community” dealer or owner do you mean “Mobile Home Park (MHP)” dealer or owner? If my assumptions are correct, I believe your paper would be easier to read to most of us if you put “our” vernacular in parentheses.

Now, to return to the new model(s). The front-end model appears to be a description of a typical independent Lonnie Dealer model. The back-end model appears to driven by the MHP owner to buy homes, move them into his/her park and sell them in the park. This model is, of course, strongly promoted by Steve Case and Corey Donaldson, creators of this website.

There is another model you speak of in your back-end model, I believe, where the MHP owner actually funds the independent Lonnie Dealer allowing longer payback plans and “flexible use as it pertains to the homes”. I do not know what that last statement means. Overall, for the purposes of a white paper, I would like to see more clarification of the new model(s).

There are two issues not addressed in your paper. You mentioned that this plan is for “affordable” housing. There is no discussion of how manufacturers could contribute to making these homes more affordable. As you may be aware, most new manufactured home dealer sales are double wides (DW) to be put on land. The dealers are smart enough to buy up land and develop it for this very purpose. There is more profit in a DW just as there is more in a Cadillac than a Chevy. What the MHPs need are truly affordable homes.

What are needed are SIMPLE 2 & 3 BR homes without “Lifestyle” amenities such as inefficient garden tubs, fireplaces, etc. A basic 2 or 3BR 14 X 70 or 16 X 80 home that Lonnie Dealers (LDs) and MHP owners can buy factory direct at a reasonable cost.

Finally, Manufacturers and MHP owners need to address the “affordability” of energy costs to our typical consumer. This is particularly true for more northern climates. Liquid Propane (LP) gas has quadrupled in price in our area in the past three years. Although everyone will have to take a hit on energy costs in their daily lives, those with less means will be hit proportionally harder. Perhaps MHP owners need to face upgrading their infrastructure to 200 AMP service and purchase (using the new model(s)) all-electric homes, heat pumps, or otherwise energy-efficient homes.

Thank you again Ralph and Jim for endeavoring to create this white paper, it is a noble and timely task.

Steve Billmann,

Heartland Investors, LLC

Mr. Billman,

Thanks for your kind words and detailed review of our paper. This is just the type of feedback I was looking for as it will help give further clarification.

Your questions regarding the terms used for front end model and back end model are well noted.

The thrust of this white paper is not directed so much towards “lonnie dealers” who typically do not own communties. In contrast the thrust is towards community owners. However the ideas in this new model might be developed further to also apply indirectly to “lonnie dealers”.

What I mean when I used the word dealer is a retail licensed manufactured housing dealer. That is one who is licensed by the state in which they do business to buy and sell manufactured homes. My experience has revealed that a retail MFH dealer can be a street retail dealer similar to a car dealership we all know. Or as in my case it can be a retail MFH dealer who owns a community or several.

Therefore when I say community dealer lender I am referring to licensed retail dealers who own communties. In addition these "community dealers’ also provide “in-house” lending to their residents.

I am going to go back and review our paper to update it with further clarifcation along these lines.

When I say front and back end models what I am trying to communicate is one new model as whole with 2 parts. The front end referring to the sales, marketing, and deal structure for a buyer/aka resident. The back endreferrring to all the relationships behinds the scenes with the Manufacturers, Investors, community owner, and others that would allow the front end experience to be a reality.

In my view the front and back ends are both needed for the model I am referring too.

As for affordable housing, I am referring to the Federal goverments view of “affordable housing” not so much double wides vs single wides. I am referring to the retail consumer who buys a home and whether it is affordable for them. I am not referring to whether the manufacturer makes it affordable for us, “dealers”.

Does this help?

Your feedback would be appreciated.


Thanks for the clarifications. So your new model’s front-end and back-end are actually the “views” of the model from the buyer’s perspective vs. supplier’s perspective. Like the outside view of a car vs. under the hood, so to speak.

One potential problem is individual State Law. Many states require a dedicated sales lot in order for one to be a licensed MFH dealer. For the typical MH community this can present a problem. They may not have or want to give up space for a lot. They may not be zoned to have a lot, even next door. Thus a community owner may be better off purchasing MFHs and lease-optioning them to avoid dealer status.

Affordability: I see two tiers of MFH sales in the future:

  1. The current dealers focus more intently on DW sales onto indiviaual lots.

  2. Community owners and Lonnie Dealers purchasing homes for Parks.

As far as affordable housing, singlewides are generally more affordable than DWs and easier to put into parks. We can’t provide affordable housing to the typical MHP retail consumer if we can’t get affordable purchase costs from the manufacturers.



This is the line of thought I am glad to see on the forum. Identify problems and work for answers. Keep it up. Very good read and timely.


Ralph, I want to thank you for this white paper. Like many on this site, I have lived through this “changing of the guard” era. I had to read the entire paper twice to fully internalize allof the content.

I agree with 99% of what you write, but the acual problems facing the MH industry in Florida (and other states) are even more complex and harder to solve IMHO.

We have something here called HBU (highest best use). A taxing authority can rezone a MHP from MHC 1. to multi family waterfront with a stroke of the Property Appraiser’s pen. As an example, a 1M Park can pay 28K in Property Taxes in Dade County as a MHC1 Park in 2006. For 2007 taxes with a 60 day notice it can be re-zoned Multi family waterfront (condos) and taxes would sky rocket to 175K per year (zoned for 175 units) even though it has no condos on the property. There are 43 Parks being sold for HBU in Florida as we speak. This is a way for developers to force waterfont Park owners to sell their property and get condos built. In Florida an affordable condo is 450K. A lot of older Parks in this State were built in the 60’s and 70’s on marshlands away from large urban areas. cities have grown to make this property VERY valuable in today’s market.

Folks that own mobiles in the Park being closed are SOL. State gives 'em a check for 4K but a lot of homes are too old to relocate into newer more stable Parks. This has made retail Buyers very leary of moving into upscale, waterfront Parks. Lot rents in these parks can be 550-900 per month another downside for a retail Buyer.

A second problem facing MHP Owners is trying to keep individual mobile home owners insured in their park. Stated value 20K homeowner insurance for a mobile owner in a Park can be 2K per year depending on County. Citizens Insurance (State of Florida high risk pool) is the only game in town in most Florida Counties. Park Owners usually require proof of insurance for privately owned mobiles in their Park. A lapse of coverage constitutes a lease default in most cases. Some really smart Owners even require proof of insurance for every vehicle parked in the park.

These problems could be Florida specific, but I feel they might be widespread.

Large Parks sell for 8% CAPS(or less) here and it is a challenge to fill Parks here. Our coastal counties require Wind Zone III homes and a Fleetwood 28X60 3/2 low end home will be 78K delivered and set. In a 600 per month lot rent community, a total housing cost (lot rent plus home note,plus personal property tax, plus insurance) will be close to $1500 per month…without electricity, gas, amenity fee, cable, water, sewer. With these factored in a more representative total housing cost could be 2K per month. To me, this is not that affordable. Homes of Merit just announced a 9% cost increase on all 2009 homes…great timing, eh?

Greg Meade


You are welcome. This white paper is a compilation of what I believe are many thoughts and insights from people like yourself who believe in our asset class.

As you demonstrate in your detailed response it is important to recognize that real estate is local and thus rules, regs, demographic trends, and hurricanes will impact a general model like I am presenting in different ways.

Based on these comments and some I am recieving from other industry leaders I am planning on an updated version of this white paper. I hope to clarify some of the terms and even include some financial modeling.

So please keep the great feedback coming. I need a taste of humble pie. The better the critique the better we can make this model.

By the way this model is not abstract theory. It is being proven throughout the country by many owners of community including Dominion Ventures.


Ralph Cochran


Dominion Ventures


Greg - I don’t mean to hijack this thread, but what are the major risks (and if you don’t mind adding the minor ones, too) in the Florida market for community owners? I currently own a medium to large park in PA and am familiar with the general issues of MHPs. However, I would love to own a park in a region where people are actually migrating to (and not leaving in droves like PA) and was surprised by your comments concerning re-zoning and the resultant tax increases.



Hi Ralph and Jim,

Nice to see this thread - it’s an interesting read. I applaud you for openly sharing something that you have passion for which may help others fill vacancies. Let me see if I get the “gist” of what you are suggesting.

First a couple of comments -

Regarding the comment that the “old model was nearly identical to the one used by the auto industry”: The main difference between it and the auto industry is that if the car buyer defaults the end lender does not need to pay someone else “driveway” rent or storage fees. This is one of the largest problems with RETAIL chattel lending in someone else’s park.

Jumping to the section labeled - Industry at a stand still -

Community owners have always needed to become the primary players in filling vacancies because until a park is filled the community owner is part dirt investor and part project developer in charge of making sure homes get sold. Both hats need to be worn in order for a “new development” or “re-development/turnaround park” to be successful. Relying on someone else to do this is less of an industry problem and more of a “naivety” of some park owners. Any community owner that did not take this seriously got hurt - those that do tend to prosper. In essence - historically, present or future this fundamental will never change.

With this in mind community owners have always had the same choices:

  1. work with a dealer with the idea that the dealer can make the profits;

  2. do it themselves by playing park owner/dealer and benefit from the wholesale retail spreads (bank or cash deals);

  3. do it themselves and benefit from the wholesale retail spreads plus financing arbitrage (lonnie dealing in your own park by purchasing used or new units and selling on terms while raising wholesale financing to stay liquid).

Now I think we are to the area where you suggest your new idea - I think you are suggesting that if you help a park owner fill vacancies you will provide recourse on defaults (buyback relationship). In return you would like to have a piece of the parks dirt upside. Once occupancy is up you suggest a park refinance that might allow the park owner and you to go their separate ways (assuming you have been paid the equity, I am also assuming you will continue to provide recourse on the lot rent if the homes go into default). This is my understanding of the section where you end with the phrase “There are many other ways…(to) cross-fertilize…” Please advise us if I’m even close to understanding - the paper for me is a little hard to stay on track with (probably my problem not yours :wink:

The next part I believe you are simply suggesting that bridge financing could turn into permanent financing. This practice is common for park owners who do their own infill programs. We borrow to move in the home (privately or institutionally) and then we provide end financing to the public - our underlying loans mirror the terms of the tenants thereby providing infill financing and long term retail wraps. This of course if vital whether it’s the park owner our you providing this service.

Under Risk Factors you break down default rates. This seems quite self explanatory with the exception of the “contrast this to a bank”. Banks do not buy back its real estate - there money is already at risk in the loan - they do have all the costs of foreclosure and resale to deal with though. It is the time required to foreclose and resell that is different between the asset classes. Of course to be fair to the bank lender on real property - he is not required to pay lot rent during this time (although other costs accrue like property tax, forced insurance, legal fees, etc - but the chattel lender has these hurdles to cross plus lot rent, and a depreciating asset to boot).

And finally under exit strategies - the NOI increases is presumed, fill vacancies and the dirt goes up in price. The “size of portfolio” hints that the arbitrage (cost of the underlying wholesale financing) would come down - I think we would all expect this as well.

So to summarize:

Instead of having a dealer handle the infill - or doing it yourself - the new model offers the park owner a dealer that becomes partners on the parks dirt in return for providing the service of filling vacancies and providing recourse to the park in case of default!?

If this is accurate then this process certainly worked for shrewd lonnie investors for a long time - I think its a great idea to take to a bigger level but in order to work a partnership of some sort must be formed. This can be a hard pill to sell and swallow on a large scale - I raise money for all my projects and find that dirt is much easier to syndicate then homes.

What if the “new model” dealer does not perform and now owns part of the dirt? What if the new model dealer goes bankrupt (now the park owner needs to foreclose on the homes and deal with the partnership)? There are many ?'s to be asked and answered to do this large scale.

Am I close in my interpretations or somewhere in left field?

Nice work, it’s a great idea and I’ll be looking forward to your thoughts.