Some things went right for Thomas S. Johnson last year, but one thing went very wrong - the manufactured housing market.

From the second quarter to the fourth, the chairman and chief executive of GreenPoint Financial Corp. watched his $15 billion-asset New York thrift hemorrhage about $140 million in charges - $94 million in the last three months alone - as the manufactured housing bubble imploded.

"We felt pretty badly about the charges we had to take in the fourth quarter on manufactured housing," Mr. Johnson said.

"We're glad" that 2000 "is behind us," he added.

But the chairman and other GreenPoint executives say they are encouraged by more recent developments.

In an interview with American Banker, Mr. Johnson and Richard Humphrey, a senior vice president, said they are especially enthusiastic about GreenPoint's 1998 acquisition of Headlands Mortgage Co., their decision to ramp up the company's national sales force, and the restructuring of GreenPoint Credit, the manufactured housing unit.

They said the mortgage unit will drive GreenPoint's growth and predict that originations will triple to $33 billion in the next five years.

From 1996 to 1998, manufactured housing sales surged as lenders and builders entered the market. In order to boost growth, lenders loosened their underwriting standards, said Gary Gordon, an analyst with UBS Warburg. But in 1999, when many borrowers failed to pay, loan losses started to mount and the market flooded with foreclosed homes selling at steep discounts.

"There was gross overlending and oversupply" in the market, Mr. Gordon said. "There will be losses for a number of years because of the overbuilding" of manufactured homes.

Making matters worse, suppliers were slow to respond to the change in demand, creating an even bigger glut of the homes and putting many of the smaller finance companies - and many of themselves - out of business.

GreenPoint, like Conseco and other large lenders, would certainly have taken large losses in any event. Mr. Humphrey said a big part of GreenPoint's problem was that it did not adequately price for risk in its loans.

Adding to GreenPoint's problem, Mr. Humphrey said, were loans acquired in its 1998 purchase of Bank of America's manufactured housing unit, Bank of America Housing Services. GreenPoint started to notice in 1999 that loans the unit had picked up in the fourth quarter of 1998 and the first quarter of 1999 were "not of the quality that we thought they were," he said. Last year the company overhauled the unit's management and installed new officers, all of whom came from GreenPoint.

Since the restructuring, the manufactured housing group has come up with a new scoring system to price for risk more effectively. This has cut manufactured-home originations substantially, the executives said.

But there is still an oversupply problem in the manufactured housing sector, and prices are still low.

Mr. Johnson said GreenPoint Credit is waiting for the inventory problem to improve and that there are signs this is already happening. He noted that 25% of the manufacturing capacity for the homes has shut down as suppliers have gone out of business, and said he believes manufactured housing will again become a good market.

"What gives me hope for the future in that business is that for as long as people have measured the size of that market, there has been a demand for at least 200,000 new manufactured homes a year nationwide," he said. "When it works its way through, it should become a healthy business again."

"There will be an ongoing demand for manufactured housing because of the combination of price and quality built into those homes," added Mr. Humphrey. "They have historically represented somewhere between 20% and 25% of new housing starts in the country and are a very viable alternative to renting for a lot of people."

Chase Manhattan Mortgage Corp., the No. 2 mortgage originator, shares GreenPoint's enthusiasm for the sector. Stephen J. Rotella, the mortgage unit's new president and chief executive, recently called the manufactured housing business a key growth area for Chase.

While most companies' origination levels dropped in 2000 because of higher interest rates, GreenPoint's grew because of a shift in focus to certain loans and the integration of Headlands Mortgage Co. in Larkspur, Calif. Further, its decision last year to enlarge its sales force is paying off, executives said.

In each quarter last year, Mr. Johnson said, GreenPoint outperformed the rest of the industry in originations "by a material amount." GreenPoint was able to drive up volume, he said, because of product flexibility.

"Interest rate levels change, people's needs change," Mr. Johnson said. When rates are rising, he said, borrowers shift from wanting refinances to wanting second mortgages and home equity lines of credit.

"The logic there is obvious: If you need money to build a kitchen or a garage or to pay college tuition, you don't refinance your whole house if it would result in a higher interest rate on the whole thing in order to get the money," he said. "So in a period like that you add debt, specifically related and probably in the precise amount that you need for whatever it is you need to do."

GreenPoint's sales force expansion and its integration of Headlands have enabled the company to more effectively tap markets such as Chicago and Texas, where neither of the companies had been all that successful in the past, the officials said. The moves have also allowed it to handle growing volumes of home equity credit lines and second mortgages.

GreenPoint bought Headlands because a major 1995 expansion outside New York - where it had operated since it was founded in 1896 - and into markets like Chicago, California, and Texas, was nearing the end of its line. The expansion was faltering because GreenPoint only offered one type of loan, the "no-doc" or no-documentation loan, which became vulnerable to copycats.

"Competition was picking up and it looked like we were starting to cap out on the amount of business we could do there," Mr. Humphrey said.

Buying Headlands, the executives said, let GreenPoint diversify its product offerings in the nonprime, Alt-A arena. In an era when the marketplace in mortgages has become increasingly commoditized and dominated by bigger and bigger players of the likes of Washington Mutual Inc. and Countrywide Credit Industries, GreenPoint executives said, it is important to offer unique mortgage products.

Thomas O'Donnell, an analyst with Citigroup's Salomon Smith Barney, said GreenPoint's focus on Alt-A loans is promising because spreads in the conventional market have been tightened by excess liquidity. "The world is moving toward Alt-A," he said. "It's a good place to be. It's a business they know, and that's a strength."

"They are doing very well," Mr. Gordon added. "They are benefiting from the refi boom, trying to get market share by growing geographically, and taking advantage of technology to drive down costs."

Mr. Johnson said the company's mortgage unit should become the primary driver of profits. GreenPoint is rebuilding its mortgage portfolio so that when interest rates inevitably rise and the market for refinancings dries up, the company will have "a strong net-interest income flow from the balance sheet" to offset the drop.

But that has not changed GreenPoint's openness to a merger, which, Mr. Johnson said, could also boost profits and efficiency.

Washington Mutual on Monday announced a deal to buy Dime Bancshares, one of four major New York-area thrifts along with GreenPoint, Astoria Financial Corp., and North Fork Bancshares.

Mr. Johnson has long spoken plainly about his wish to consolidate with one or more of these thrifts, preferably as a buyer, and several observers have predicted that Wamu could eventually buy most of the Dime-size properties in New York. "The stars have not been in proper alignment to get deals done, and I don't know when that will happen," he said.

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