Having closed its deal for Barnett, NationsBank is diving headfirst into a lending area that some worry may be shark-infested.
Through its NationsBank Consumer Finance Group, the Charlotte, N.C.- based bank is building a manufactured-housing unit that helmsman John Brink would like to turn into a "force for other lenders to contend with."
Mr. Brink is a manufactured-housing veteran who joined Barnett in May 1997. He once served as chief financial officer of Green Tree Financial Corp., far and away the largest lender in the sector.
He came to Barnett as a consultant, and the bank announced soon afterward that it would build a de novo manufactured-housing unit.
The unit, now under the NationsBank umbrella, employs 125 people, Mr. Brink said, but that number will "grow substantially" before yearend. He expects the unit will make $500 million of manufactured-home loans this year, both directly to homeowners and to dealers for inventory financing.
"Nations had not really focused on the manufactured-housing business," which is odd, because the business "fits its footprint nicely." Mr. Brink said. Seventy percent of manufactured-housing shipments go to the Southeast, where NationsBank is based.
Having a bank parent has some distinct advantages, Mr. Brink said. "Nations has a tremendous amount of capacity and clout," he said. The bank's deep pockets will allow Mr. Brink's division to keep loans in portfolio, rather than securitizing them. And NationsBank's "excellent systems" and customer information resources will allow the unit to develop better new products, he said.
Competition has increased, but so has the size of the industry.
"The pie is certainly bigger," said Joseph Owens, vice president, finance, for the Manufactured Housing Institute. In 1997, 360,000 manufactured homes were shipped to dealers, about twice the volume of four years ago.
And manufactured-home dwellers are buying larger homes, he said: About 60% of new manufactured homes are multisectioned, compared with about 30% a year ago.
But recent events in manufactured-home lending have given some observers pause.
"Economically there has never been a better time to lend to consumers," said Jeffrey Evanson, an analyst with Piper Jaffray. "But we've seen a number of key players (in the manufactured-housing market) stumble."
The top two lenders in the manufactured-housing business, Green Tree Financial Corp. and BankAmerica Corp., had a rough 1997. Green Tree took several writedowns, because competitors are stealing borrowers from its portfolio, causing more prepayments.
In October, BankAmerica put its entire manufactured-housing division for sale, saying that it was incompatible with the rest of the bank. BankAmerica acquired the unit when it bought Security Pacific Funding Corp. in 1992.
Subprime lending is not a "business we have any particular strength in or any appetite for," chief financial officer Michael O'Neill said when BankAmerica announced the sale.
Manufactured-housing dwellers, who historically have lower incomes than buyers of traditional homes, "just don't represent the same cross-selling opportunities," Mr. O'Neill said.
Mr. Brink countered that manufactured-home dwellers "may not be multimillionaires that need private bankers, but they have a need for banking services."
NationsBank is also going to emphasize cross-selling to the unit's dealer customers, offering them business and personal loans, and to manufacturers.
"There are commercial loan opportunities," Mr. Brink said. "We can offer securities if they need to raise capital. It's a pretty broad, underserved market."
