been ignored by all but a few mortgage bankers. But that may soon be changing. The demand for manufactured housing - built in factories and shipped to a lot - is growing at a dynamic pace. Related stocks have been outperforming all other building stocks this year, and analysts continue to rate the leaders in manufactured-home lending strong investment buys. Now there are early signs that traditional lenders may be seeking a foothold in the market. "We're looking at close to 30% of all single-family residences currently built in the factory. How long can you turn your back on that kind of market?" said Robert Schoos, manager of retail marketing for Washington Mutual Savings Bank in Seattle, one of the few depository institutions to have established themselves as lenders to buyers of manufactured homes. Shipments of manufactured homes rose 12.4% during the first six months of 1995, and the Manufactured Housing Institute expects sales to reach 350,000 this year, an increase of almost 20%. Washington Mutual did $340 million in manufactured housing loans in 1994, compared with $270 million in 1993. "If you're going to be in the residential lending business, you can't stay out of it for too long," added Mr. Schoos. Affordability is the key to manufactured housing's success. "We can put someone in a three-bedroom, two-bath house for $500 a month," said Emmett Moore, an investor relations executive with Clayton Homes. Add to the equation the lack of price appreciation in conventional housing in recent years and a commitment by the industry to eliminate the "trailer trash" tarnish from its image, and you can come up with staggering growth figures, he added. The average purchase price of a factory-built home has risen as interest rates have fallen. Loan balances of more than $30,000 have risen to about 15% of all manufactured-home loans made this year by BancAmerica Housing Services, said John Wheeler, chairman and president of the San Diego-based lender, the second largest in this niche nationwide, after Green Tree International. His company, which became part of BankAmerica Corp. when the San Francisco giant acquired Security Pacific Corp., hopes to double its origination volume this year to $2.6 billion, and increase its servicing portfolio to $6 billion. But is it time for larger numbers of mortgage banking companies to jump into the lending side of the industry? The Manufactured Housing Institute is an ardent supporter of such a movement and is pushing for a wider range of financing opportunities for its members' customers. "We need to work more with the mortgage banking industry so there is an understanding between the two of us," said Joe Owens, vice president of finance for the Washington-based trade group. But competition is fierce, with vertically integrated giants such as Clayton Homes of Knoxville, Tenn., and Oakwood Homes of Greensboro, N.C., controlling some combination of manufacturing, retailing, and lending. Green Tree, based in St. Louis, is also an industry power. Dealer-manufacturer-lender relationships are already well-established and closely guarded. "If a small player comes in and lends to independent dealers, they'll probably go head to head with Green Tree," said Clayton Homes' Mr. Moore. Another problem: The mechanics of originating and processing loans to buyers of manufactured homes represents uncharted territory for most mortgage bankers. Loans are of two types: for the housing unit alone, or with the land it stands on. Making a loan for the unit alone is akin to making a car loan, say lenders. There is no need to adhere to Real Estate Settlement Procedures Act regulations, unless the loan encompasses both the unit and the land it stands on. "No dirt, no Respa," is how one lender sums up the split. There is no secondary market for stand-alone units, while unit-plus-land loans can be resold to the Federal National Mortgage Association and Federal Home Loan Mortgage Corp., like any conventional mortgage. Lending for manufactured housing is an indirectly financed transaction, with a dealer taking the application, sending it to a lender, and often getting same-day approval. Credit scoring plays a big part in the quick turnover - it's a given that buyers will be scored. Loan amounts are a fraction of conventional-home balances. BancAmerica's average is $25,000. "We're servicing five times as many customers to make the same amount of money," said Mr. Wheeler. Servicing techniques are radically different: Case in point, Clayton Homes' retail group is compensated based on how well the paper they generate pays. "If a customer pays $200 on a loan, $20 goes to the lot," explained Emmett Moore, manager of investment relations for the company. "Retailers are located within 50 miles of most of their deals, and they can see what is going on. If someone is 30 days past due, they get on the stick and find out what's wrong." And, despite the push by the institute and the increased use of high- quality construction material, manufactured housing as an industry still has an image problem. Joe Owens, the Manufactured Housing Institute vice president, doesn't live in a manufactured home. He can't. His suburban Washington zoning board voted against allowing such housing in the neighborhood. "Most people still have an image of manufactured housing as an old trailer park - low-income housing, with lots of kids, where (residents) take more out of the system than they put in," said Mr. Owens. "The board voted with their hearts." The industry is having a hard time shaking the image when it comes to convincing traditional mortgage lenders. "A lot of people believe that you come in and hook up these things and haul them away at night," said Mr. Moore. But the institute is on a mission. Mr. Owens wants to sweep away the trailer trash stigma that manufactured housing has carried for years. The industry itself is already several steps ahead of its image. Since the early 1980s, manufacturers have been building their housing with thicker walls, larger floor beams - "No more plain metal siding," as one analyst summed up the new look. For $70,000, one can purchase a tk bedroom home with cedar siding and Spanish tile from Clayton Homes. The image-polishing campaign has made progress, as the recent rise in shipments shows. "We're less dependent now on the 'newly wed and nearly dead,'" said Mr. Owens. Manufactured-home buyers increasingly include what he calls the preretirement market - couples who no longer need a larger home now that their kids have moved out. Others include a significant move-up market - buyers trading in smaller manufactured homes for larger, multisectional ones. On Mr. Owens' wish list: a fair shot at zoning, "based on real, not perceived issues." Experts' advice to companies looking to enter the market: Make sure you know what you're getting into.

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