A little-publicized fact about the current housing boom is that about a third of all sales are of manufactured homes. According to figures from the Manufactured Housing Institute, shipments climbed by almost 10% in the 12 months through August.
Supporting the rapid growth is a strong secondary market for securities backed by loans on prefab homes. "Securitization has expanded to become not quite a commodity product, but one that's recognized by investors," said Gary Busch, a managing director of Access Financial, a new participant in the market.
Speaking at a roundtable sponsored by Standard & Poor's, Mr. Busch said, "Securitization really has helped the industry to grow. The effect has been similar to what Ginnie Mae did" for government-backed mortgages.
A transcript of the roundtable was published in S&P's Credit Week.
Participants were asked whether pricing of manufactured housing loans was being more closely linked to the capital markets now that securitization had become widespread.
Rick Bauerband, an executive vice president with CIT Group, said he thought the market had become more competitive and that spreads had gotten thinner because of the development of the secondary market.
He pointed out, though, that market conditions also affected pricing, because CIT provides 60-day rate locks for customers and will have narrowing spreads when rates are moving up.
Panelists said the growth of the industry was likely to slow in the next few years, but still continue at a fairly brisk 5% to 8% rate. This indicates the supply of loans for securitization should be strong.
Another topic was whether the loans would move in tandem with other consumer credit such as auto loans and credit card loans in an unfavorable economic cycle.
Norton Wells, a senior vice president of Associates Corporation of North America, said he expected the loans to perform much like mortgages, because people will be doing everything possible to stay in their homes and would likely give priority to the mortgage debt.
