Investors have punished FirstMerit Corp. and GreenPoint Financial Corp. since Associates First Capital Corp.'s recent announcement that it would be leaving the manufactured housing sector.

Shares of FirstMerit, which acquired a prefab housing lender last year, have fallen 3.8% since Jan. 27, when Associates said it would miss first-quarter earnings targets partly because of a $110 million charge to quit the business. Shares of GreenPoint, the No. 2 manufactured housing lender, are off 10.3% since the news.

According to recent data from the Manufactured Housing Institute in Arlington, Va., manufactured-home sales fell 6.5% last year, to 348,671 units.

Supply outstripped demand, said Kami Watson, the institute's director of communications. "Many new retail organizations were entering the business," Ms. Watson said. "There was also an increase in repossessions in 1999 because lenders were giving credit to some people who are not higher-tier borrowers."

The fact that FirstMerit is in manufactured housing has hurt its stock, said Rosalind Looby, an analyst at Donaldson Lufkin & Jenrette. "Investors have a lot of questions. People are increasingly nervous about credit quality."

FirstMerit, a $10 billion-asset banking company in Akron, Ohio, got a prefab housing subsidiary, MCi, last year by buying its parent, the thrift holding company Signal Corp. of Wooster, Ohio.

For the moment, FirstMerit is stuck with the business, Ms. Looby said. Accounting rules prevent the sale of a subsidiary acquired in a pooling-of-interests transaction for two years, she explained.

Analyst Brock Vandervliet of Salomon Smith Barney Inc. said the market has unjustly punished FirstMerit. He said the company's loss rate on manufactured housing loans is improving.

John Masco, chairman of MCi and an executive vice president of FirstMerit, said the company is not worried about losses in its portfolio. "We have always lent to the upper end of the credit spectrum," he said.

Mr. Masco acknowledged that the sector has gone through troubled times. "We are certainly feeling the pinch in origination, which has dried up," he said, and "the increase in repossessions has caused some heartburn."

But "we are looking at an opportune time of stabilizing this business and letting the weaker players fall out" despite a challenging 12 or 18 months ahead, Mr. Masco said. He said manufactured housing contributed only minimally to the company's bottom line - bringing in $2 million.

GreenPoint, which bought manufactured housing operations and servicing rights from Bank America Corp. in October 1998, said its shares have been falling along with other thrifts' because of higher interest rates.

"We view Associates' leaving the market as positive for us," GreenPoint spokesman Richard Humphrey said, "because we can pick up more volume and maintain better pricing. Our manufactured housing business operation has been quite strong." He noted a 20% increase in loan volume last year, to $3 billion.

Conseco Inc., the Carmel, Ind., insurance and financial services conglomerate, is the No. 1 manufactured home lender. Its shares have yet to recover from a dramatic decline after it acquired the manufactured home lender Green Tree Financial in 1998. Since the Associates announcement Conseco's shares have risen 7.5%, to $16.40625.

Analysts said there has been no indication of trouble at Green Tree during the recent slump in the sector.

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