Mobile-home lending proved a rocky road for even the most experienced financiers this year, but it hasn't scared off some of the savvy ones.

Looking to expand their customer bases and generate cross-selling opportunities, Conseco Inc. and GreenPoint Financial Corp. are buying the two biggest manufactured-home lenders, attracted by steady sales growth since 1991 and changing demographics of manufactured-home dwellers.

The prefabricated units, which include trailers and more elaborate homes that are assembled in factories, now account for one of three new single- family homes sold in the United States.

But the industry continues to be full of contradictions.

While banking and financial giants were scrambling to get into the business over the past 12 months, several of the biggest specialists were sustaining serious hits to earnings.

"It's always been a tough niche business," said John Brink, head of NationsBank's manufactured-housing unit. "If you don't do it right, if you skip a beat, you're going to have problems."

Green Tree Financial Corp., the leading lender in this sector for 15 years running, was forced to take writedowns when competitors plucked borrowers from its loan pools. The St. Paul. firm was later sold to insurer Conseco for an impressive 50% premium over its stock price.

Cargill Financial Services Inc., Minneapolis, shut down a unit it started in 1994, after a rise in delinquencies and defaults.

And No. 2 lender BankAmerica sold off the manufactured-home business it had acquired from Security Pacific in 1992, saying the cross-selling opportunities were overrated. Buyer GreenPoint Financial Corp., a big New York thrift company that specializes in low-documentation mortgages, said that the acquisition would provide another "asset generation niche."

In addition to GreenPoint and Conseco, NationsBank entered the business in the past year, picking up a three-month-old manufactured-home unit when it acquired Barnett Banks in January. The division now has almost 300 employees.

Making money in a business where the median household income is $23,300, average age is 52.7, and the asset depreciates after purchase, rather than gaining in value like a home, requires precise attention to all the details.

"People come and go over the years," said Mr. Brink, a Green Tree veteran. He pointed to GE Capital Corp. and Citibank, both of which terminated manufactured-home lending divisions in the 1980s after disappointing performance. "The field is littered with bodies."

Still, more than $14.5 billion in manufactured homes were sold in 1997, according to the Manufactured Housing Institute, up from $13.9 billion a year ago.

Homeowners are continuing to choose large mobile homes over more expensive site-built homes, and taking out larger loans to finance them. Lenders, consequently, are making more manufactured-housing loans, for more money.

The average loan size in the first six months of 1998 was $37,051, versus $35,500 in 1997 and $32,820 in 1996, according to a Prudential Securities report.

The average price of a manufactured home was $41,100 in 1997, while the average size was 1,380 square feet, according to the Manufactured Housing Institute. Traditional homes averaged $176,200 and 2,115 square feet.

"People are beginning to look at manufactured homes as a housing choice," and are not buying them because they can't afford a "real" house, said Joe Owens, vice president, finance, for the Institute.

People are increasingly buying homes to put on land that they already own, Mr. Owens said, and manufactured-home lenders are adopting land/home programs to allow borrowers to visit just one lender.

Green Tree is focusing on expanding its land/home products, said Greg Aplin, president of the St. Paul lender's manufactured-housing division.

Loan growth has not slowed at Green Tree. The company originated $2.9 billion in manufactured-housing loans in the first six months of 1998, a 15% increase from a year ago. Total manufactured-housing receivables totaled $19.4 billion at June 30, up 19% from a year ago.

Increasing competition in the industry has coaxed some lenders to stretch credit limits and lower down payment requirements, Mr. Aplin said.

"The barriers to entry in our business are really high," he said. "If you are really scoring (credit) properly, its difficult to enter."

GreenPoint's deal to buy the nation's second-largest manufactured-home unit from Bank America Corp. for $700 million was announce April 13, and is scheduled to close in the third quarter.

Other lenders expect to see much stiffer competition from the unit after it changes hands. Bank America had been rumored to be dumping the unit for months before the deal was announced, and it may have been hurt at the time by defection of employees.

GreenPoint will not discuss plans for the unit until the deal is closed, a spokesman said. The thrift is expected to name the unit GreenPoint Credit Corp.

Associates First Capital Corp., the third-largest manufactured-housing lender in the country, was spun off from parent company Ford Motors earlier this year. But the change will not affect business operations at all, a company spokeswoman said. As of June 30, Associates had a manufactured- housing portfolio of $4.42 billion, up from $2.96 billion a year earlier.

United Companies Lending Corp. plans do business as usual, despite the recent news that its parent company, United Companies, Baton Rouge, is looking for strategic partners or a potential buyer. "We look at everything as an opportunity," said Kenneth Roberts, president of the unit.

United Companies Lending made $300 million in loans in the first six months of 1998, compared with $302 million for all of 1997.

Though the market continues to grow, "it's no less crowded" than it was a year ago, said Mr. Owens of the Manufactured Housing Institute.

"Although competition is keen," Mr. Owens said, "the good news is it's keen among a number of large, sophisticated players who know how to do financial analysis and compete safely."

Nonetheless, repossessions are rising like "fog oozing up from a swamp," according to United Companies' Mr. Roberts, because of more relaxed underwriting standards and dealer fraud.

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