Wholesaler · Easley, SC · Member since 2010 · 340 posts · 249 votes
If you are interested in mobile home lending as I am then it is time to face the facts that we cannot continue business as usual. The Safe Act only woke me up to the myriad of laws that we should be complying with and are now going to be enforced by the CFPB.
If you have not read any of Ken Rishel’s post then you need to search the forums (and internet) and read some of his information. The CFPB is a serious threat to our business model and it appears we are not going to get any concessions. Just look at http://www.consumerfinance.gov. Several large links for consumers to file complaints but no link anywhere on the site to assist businesses with becoming compliant.
I am currently trying to figure out if it is worth the effort to become compliant or pursue other investing strategies. I may not be able to bridge the gap between being a small investor and the cost of becoming compliant.
My only chance is to work with other small investors to develop strategies to meet the demands of this new government entity.
How can we work together to meet these challenges in a cost effective way.
Examples of Federal laws that you should be in compliance with and should make yourself aware of. There are very real fines and even criminally penalties at stake and now an enforcement agency that is crusading to enforce these laws. No more flying under the radar.
Safe Act
Fair Credit Reporting Act (FCRA)
Fair and Accurate Credit Transaction (FACT)
Red Flag
Gramm-Leach-Biley Act (GLB)
Equal Credit Oppurtunity Act (ECOA)
Community Reinvestment Act (CRA)
Homeowners Equity Protection Act (HOEPA)
Patriot Act
OFAC
Truth in Lending Act (TILA)
Now add your states laws.
I have some suggestions but want to wait and see others response to this issue to see if anyone is interested or feels the need to act.
Jackie, The last time I posted a response to your identical post, you did no address it. Will you do so now?
Jackie - With all due respect for Lonnie, no one can teach everything a lender needs to know about the SAFE Act in an hour. Our firm is considered the manufactured housing industry authority on the SAFE Act, and we have done hundreds of speaking engagements on the subject at MHI, state associations, and the major buyer's groups since the model legislation was proposed, and we can't do it in an hour for one state, let alone for 50 states - the laws vary somewhat from state to state.
In addition, the SAFE Act is only the tip of the iceberg regarding the laws, rules, and policies those engaged in seller financing must deal with. Anyone who proclaims otherwise is either ill-informed or of ill-intent.
People using these forums are looking for some help and when it is about repairs or refurbishing, the information is normally worth considering. People like John Hyre who posts here and elsewhere are real experts on the subjects they post on. When it comes to understanding the legal compliance issues of seller financing, everything changed because of the SAFE Act, and the followup Dodd-Frank Act, but the SAFE Act is not the whole story.
Many, many seller financiers were "flying under the radar" of state regulators before the advent of the SAFE Act, and were breaking laws left and right. Now the state regulators are aware of the situation. Worse, the CFPB is now the new law in town and they have explicitly written about seller finance in the manufactured housing industry and their intent to regulate it just as they are now regulating banks. There will be no flying under the radar, and many Lonnie Dealers may well end up bankrupt from fines and sitting in a gray bar motel.
If anyone wants to take that chance for themselves, that is their choice. To encourage others to take the same chance without explaining the danger for some personal short-term gain, is beneath contempt.
In fairness to Lonnie, I could not find the link you referred to, so I have no idea what he said, or didn't say, on the subject matter. This post is directed to all the "self-appointed experts" who make the issue of compliance sound easy, when in fact, it isn't.
There are solutions, and our company is one of several that offer help to those engaged in seller financing, in addition to the maybe 30 law firms that are qualified on the subject. (We have been holding workshops for attorneys for three years to get them up to speed on the subject.) The biggest hurdle is not knowing what you don't know. Once that education is accomplished, strategies can be developed that fit the individual operation. None is this is free, using us, or anyone else, and the internet or a book is not a substitute for retaining expert consultants and/or attorneys.
Chris has spent time and money to learn what he did not know,so he is aware of some of the options, and the pitfalls. He is making a serious effort to solve the problem legally. Your post is duplicitous and dangerous. Our organization has spent millions on compliance issues. No one has a fifty buck answer to this problem.
I encourage small operators to consider Chris's idea and ask questions. If you are not large enough to handle compliance by yourself, you should band together.
Thanks for the heads up on the website. We were in the process of reworking it and evidently some older pages were left up. The site is now changed - but not finished. At least it has the correct telephone number on the last page.
I'm not sure I'm allowed to put our telephone number in a post, but it is now on the website.
For the record to everyone:
Chris C is not an employee of RCG. He is a client of ours, and he knows other clients. Because the great majority of clients are larger operators, Chris knows that to pursue the very profitable strategy of setting up a captive finance company requires both initial and ongoing investments that are difficult for a small operator. He also knows that by setting up a partnership with others who have similar needs that everyone involved would benefit.
[b]The most important aspect is he also understands how draconian the CFPB is going to be -even with small lenders.
[/b] For those small operators who are in his state or market area, you should be asking him questions and considering his proposal.
@Jackie I too looked for the video you spoke of but can not find it. I also posted a request on our local REIA club message board for a mortgage broker and got no responses other then for me to pass on any info I recieved to other investors. I do not know about other parts of the country but here Mortgage Brokers broker loans to established lenders and do not see the need or cost benefit of helping investors.
I will continue to monitor this post but I am not going to try and convince people that a serious discussion needs to take place concerning this subject. As the CFPB starts to become more active I believe we all will see the need to better understand the implications of this government entity.
It's not that difficult to stay compliant -- just pay a mortgage broker $100-$200 to handle the paperwork for you.
No big deal.
There is a GREAT free one hour audio by Lonnie Scruggs (who invented mobile home investing) at his web site www.lonniescruggs.net
There are multiple ways to solve the SAFE act issue and it should in no way stop you in any way from doing mobile home deals.
You say "No big deal."
So, have you done this? I mean paid a "mortgage broker $100-$200 to handle the paperwork for you"? If yes, in TX? In SC?
In my state, and I imagine this is true in other states, the state Commissioner of Banks does not allow this practice. To summarize my findngs on this BP topic on Sep 04 '11 about NC, "...a Mortgage Loan Originator (MLO) in our state is regulated by the NC Commissioner of Banks and MLOs operate quite differently from real estate brokers. MLOs are W-2 employees, employed by a single licensed Mortgage Lender or Mortgage Broker. You must work out of a licensed location and can't be working as a temporary service or outsource company."
I'd have to say Ken's post hits the issue. I like his comment "No one has a fifty buck answer to this problem." So true. In NC, the first 5 seller financed properties are exempt per state statute, so personally I am not impacted like "professional" operators offering seller financing. I apologize in advance for not knowing the ins and outs of SC law, but SC has adopted the same language for small operators and exempted people who annually sell five properties per year, per Section 37-22-110, 18(f).
I'll add some meat as all my social implications are in my rant of the thread just mentioned.
I also mentioned in the other thread that investors should or could ban together and establish their own mortgage company. You could have 2 or 3 investors or 50 or even 100 form a mortgage brokerage and hire a licensened MO.
Additionally, you'll need a processer and one should do about 25 deals a week, so you will have a variable cost in that office depending on volume.
Funding the loan can technically keeep you from the seller financing issue and in many states allow a deficiency judgment from bad debts. If a MH were say 75K, that's all you need to fund at the table, you don't need $M sitting in an account.
When you sell certified funds are brought to the closing table, the seller receives the money and then it is redeposited in the mortgage account. The note is in the mortgage company name and the money goes back to owner's equity then advanced to the mortgage company, it's simply an accounting function. Each owner then draws from the mortgage company, so the same funds can be used as quickly as you can close transactions.
The notes are credited to the owner's accounts for the funds advanced.
Another point is that a cash funded loan by a mortgage company can generate fee income where a seller financed note may not. Servicing the loan is also an advantage for the owner as servicing fees can be earned. When it's time for refinancing, the MC could get with another source of funds and refi the note.
With a system such as this, seller financing is "dead" as they are not equity notes. It's conventional.
While it's possible to leverage seller financed notes at deep discounts, the conventional note out of a mortgage company can be leveraged with traditional banks for a line of credit.
You will have a disclosure to the buyer/borrower that the seller has a financial interest in the mortgage company as a principle. It's not illegal for a mortgage company to fund a loan sold by an owner, but it needs to be fully disclosed.
Your MC will need an office, a sign on the door, a HUD sticker, a bank account for escrows and funding, a telephone and if servicing a toll free number along with local office complaince issues, it's not that hard.
You could have an independent MO originate seller financed notes as well, that's another strategy but I believe in the current environment this would be cleaner.
This could be a state wide lender as closings could be at any title office and closings can actually be accomplished anywhere. When I closed deals for doctors I offered to go to their office or hospital and had them sign, they really liked that!
You'll find too that the fee income, servicing and refi originations can exceed the profit made on a sale, so you're missing the boat if you shy away from the financing function.
Unfortunately there are not enough investors concerned about these new regulations. I do not fund anywhere near enough loans to do it alone and will be the first to admit that I do not have the knowledge that Bill or Ken have to properly structure this. I would of course hire consultants such as Bill and Ken but as Bill stated it will take at least 25 deals a week to get this off the ground.
For now I have rented my last couple of homes and have been investigating lease/option scenarios such as http://leaseoptionmhsales.com but financing is what got me started in this type of investing and I would like to return to it.
Thanks Ken and Bill for all the insight and keeping the conversation going.
I am still looking for other like minded investors in or out of South Carolina interested in discussing the formation of an entity to facilitate some form of owner financing. Small park owners, "Lonnie Dealers", small retailers, etc. could all benefit from this type of collaboration.
Chris, you don't need 25 deals a week, when you get to that level the MO will need a processor to assist and that production level needs to be consistant to justify another person.
You can also find an independant mortgage broker, one who runs his/her own shop and work out the process with them and as production increases from you and other dealers that MO could oversee another office or department.
I really think that initially you need to find someone who can hit the ground running. There is no way that someone who has not been in the financial arena can walk into a mortgage office, do the job and be compliant.
Bill, we have estimated the costs of compliance for Chris privately, and while it is no where near 25 deals a week, there is a level that needs to be hit in order to break even.
There are some, but not all - over even most - states that allow the use of an independent MLO as part of a strategy, but only if everything is properly structured. If it is not properly structured it is very dangerous for both the MLO and community owner. RCG has trained a number of MLO firms over several states in their structural and compliance responsibilities successfully (meaning agreement by state regulators as to the methodology), but most are not knowledgeable enough to transact the process correctly.
There is a confrontation about to happen with two MLO firms in California that are advertising what you are suggesting without the structure being correct, that will include RCG and two independent California law firms later this month. The law firms are involved because community owner clients of theirs did, in fact, do what you suggest because the advertising of these two firms claimed they had a solution that would exempt the communities from licensure and compliance when in fact the structure and methodology utilized was worthless. They contacted us and ask us to get involved.
Please do not assume that any MLO can solve a retailer or community owner's problems because that would be inaccurate. Some properly educated and structured firms can, but they are the few.
Lastly, Chris is a graduate of our Captive Finance Workshop and continues to utilize our consulting services. We have done the same thing for thousands of larger operators since 2006, and, so far, no one has had a major compliance violation with state regulators. We expect the same will be true with the CFPB examiners. We are the ones who advised him to co op with other small operators in his state if he could, which at least two others have done in other states.
Ken, I didn't suggest a particular structure for the entity, that seems to be kind of a plug for services, no offense, but are you saying that a dealer can not send a buyer down the street (or suggest the buyer see someone so as not to get into steering) and have that MO originate, process and provide the note? That is what the SAFE Act and the consumer protection bunch are requiring, that such notes be originated by a licensed MO.
I'm not familiar with the state laws there but I'm sure they can't be so strange as to contradict the purpose of the federal statutes, simply add additional requirements. I can see where there may be a total disconnect between the mortgage folks and the dealer. Especially if the dealer has control over the operation, but being a passive investor with a well written operating agreement for complaince may solve those issues.
I hope that no one takes my advice in a case like this as I'm simply making suggestions to look at. I have not had the opportunity to talk to Chris and I have no idea of his talents, education or dealings and that would be key to suggesting specific advice.
It appears you have a working relationship going and I can understand you not wanting to discuss specific details unique to dealers in that area, but this is a forum where we discuss such issues. I am sure tha taking my advice is not dangerous when tweeked to state and local regulatory requirements, and I advise anyone involved in financing to have the operation blessed with legal water before they open the doors....if one doesn't have a few hundred bucks for an attorney familiar with lending, they don't have enough money to be in the business!
Regarding the independent MLO usage. The SAFE Act Final Rule was very clear that MLOs could be used by those engaged in seller financing, and the analysis we released 7 days after the final rule said so. I believe it is a very good plan for a lot of smaller operators if the MLO is structuring correctly and compliantly as the originator in some states.
It would take me hours to explain which states create problems and what those problems are, and we have hundreds of hours of attorney time in creating that base of knowledge. People pay us for that knowledge and understanding. (I am more than willing to share, without cost, some information in the spirit of this forum, but just as any good professional, we get to draw the line on what we give away, and what we share.)
What I will share is this. You (I believe) understand how the relationship must exist to be correct, and you are assuming everyone who reads here will also understand as well. My experience in internet forums, and even in speaking engagements at association meetings tells me I (and our employees) must be very, very, careful of what we write and say, because most people will read or hear what they hope to read or hear, which is often far from correct.
You are assuming way too much if you think the vast majority of MLOs are the least bit knowledgeable about what the law requires of them. Their thinking is mostly what I would call "document based". Give them the right software to spit out RESPA disclosures (even on chattel loans) and closing packages and everything is legal - right? Wrong! There is a lot more to it, which I am sure you know, but they do not. I base this on all of the independent MLOs we have trained since July 1, 2011, and what they do not know, as well as cases similar to the ones in California I discussed in an earlier post.
I agree with you that people need competent advice, but I do not share your view that an attorney who is competent in regulatory compliance is only going to cost a "few hundred bucks". We have six different law firms on retainer, the least expensive of which charges $450 per hour for their work in Louisiana law (much different than the rest of the US) with 2 of the law firms (Washington DC based) charging $1,000 per hour and $1,200 per hour respectively. I know you and I fundamentally disagree of the need for much of what has been propagated in the last several years, and this could be part of the reason we do. Local attorneys (in our experience) cannot hope to keep up with this onslaught and we are going to be part of a conference in Chicago during the first week of May in which over 500 attorneys are paying over $4,000.00 a head to attend a two day workshop on just one segment of the new regulations. If they attend all of the segments, they will have invested over $20,000.00 in registration fees alone.
The point is, regulatory compliance is neither simple nor inexpensive any more. For the operator who does 10-20 loans a year, the burden is huge, and almost impossible unless the operator is very well capitalized. It is the reason why we suggest just what you suggested earlier in this thread, that small operators band together and form co-ops like Chris is trying to do. Most of the people on this forum are far smaller than the smallest bank you were ever charged with examining, and while I agree there is a need for lenders - no matter how small - to be regulated and examined, the Dodd-Frank Act and the SAFE Act threw them under the bus. Maybe some deserved it, but I do not believe that all of them did. I would also contend, there were enough regulations in place before the SAFE Act and Dodd Frank Act, it was just that no one ever bothered to enforce them on many of the smaller (and even many larger) non depository lenders in the past.
In conclusion, you and I agree on many things except for the need for more regulation. I believe lenders should be regulated, and the consumer protected to some degree. We preach compliance just as you do. What I think clouds some of the rest of our agreement is we have learned over the past six years just how great that burden is, how naive and stubborn many seller financiers are, (which affects their comprehension), and how many people are trying to sell "answers" to promote some money making scheme that benefits them without thought to the conserquences to the people who invest in those " easy answers". In this very thread you can read a post by a gal who was looking for some type of gain by giving an "easy answer".
Regarding us, of course we also make money from what we do. I do not however think many of the people who post here will ever become our clients, nor in most cases, would we ask them to be. I come here, perhaps for the same reasons you do, because I want to help and because I get frustrated with people who pass off easy answers as intellegent solutions, which in reality is what many want to hear, but still incorrect and dangerous. Many times what I read reminds me of the old saying, "There is always plenty of free cheese in a mouse trap".
What I have been looking to do is essentially a combination of ideas here.
While Ken's program is very good it is still structured for a large community or retailer with at least the owner working full time in the business and usually having employees to help with getting compliant and maintaining compliance. I am a full time employee who is working very long hours just to build my investing business on the side. This was a discussion I had with several of the attendees at Kens workshop about how I manage my investing while also working full time. That is where I was considering the 25 deals a week in Bills scenario because realistically I will need to pay someone to manage this process.
The cost that Ken is offering his services for is very reasonable and no doubt he will be one of my consultants however I still can not justify making that large an investment of time and money on the small volume I currently do. These are the type of investors I am trying to reach out to and figure out a path. Guys like me who are getting turned down due to low volume from some of the companies that offer origination services that Ken has recommended but are also to small to develop a fully compliant entity.
The idea Bill offered of working with a local MO seems on the surface to be great but their are 2 issues with that. One is Ken's point, the MO needs to know exactly what they are doing. This could be overcome by working with Ken and the MO to insure compliance. Second, which is the biggie, is that I can't find any MO's who are interested in doing it. In South Carolina an MO has to work for a finance company. If they work for a finance company then they generate their own loans and have no reason to help me. There are no "independant" MO's in SC. Is there an MO in SC that I could possibly work something out with? Probably, but I am still looking for them.
This takes us back to the original scenario of creating a finance company from scratch to originate owner finance notes. I am to small for a true captive finance entity with in my business. I need a team of experts like Bill and Ken to assist me and a team of investors to create this entity. I think Bill laid out an excellent rough draft of how to structure the organization and I know Ken has the specific knowledge to assist in the compliance.
Is this the best route? I don't know but it really excites me to have two business leaders of the caliber of Bill and Ken discussing it and I feel certain that a path can be developed to follow.
Even for investors in other states I believe we can still work together to develop this business model and share cost. The basic business structure and the federal compliance will be the same. We will only have to partner with in state investors and make fine tweaks for individual state compliance. If anyone is interested Post or PM me and let's at least discuss it.
Yes, agreed, I never said compliance was cheap. I suspect you could have a note reviewed with an attorney and say an operating agreement and that could be a few hundred bucks, but no, devising and setting up a strategy within an entity, funding sources and accounting functions, disclosures with settlement activities would certainly be expensive if you could find an attorney who could even do it.
I do realize how small some dealers are as I have assisted them in the past in financing activities. Used car dealers have a better inventory turn-over!
Ken, unless someone has your experience or mine they have no business trying to go it alone if they only do even 10 or 15 deals a year. They will have to partner up with others for economies to scale.
And yes, I have no interest in making this the longest thread on BP and it would be if we got into structuring entities along with compliance issues in this climate.
What I would like to see is regulation for those doing under xxxxxxx dollars in business and additional requirements for larger operations as they are more complex. They didn't as it makes their life more difficult! Many of the regulations need to be cleaned up instaed of allowing them to lay dormant and not enforced, IMO.
There is also the old standby gig that an examiner can use being "prudent lending practices" but not enough teeth to it but they could mount up and cost a lender.
Many states like mine lack any real consumer protection laws and lenders have been left alone more often than not as there had to be clear evidence of fraud before the state AG would clamp down, they are too difficult to prosecute as attorneys aren't schooled in the finacial arena in law school, it is a specialty.
So, I'm not really for more regulation as I am good regulations and we still are not there, but how they enforce what has been done has yet to be seen, time will tell.
Lastly, at least the MH dealers can solve the issues at hand. Seller financing is a different animal as underwriting is not the same as conventional if it is done properly. You are looking into the future and trying to see if the buyer can turn into a conventional loan later on where conventional is simply do you qualify today. Having more meat as colloateral with dirt mortgaged by an investor is a different ball game, so your positions are unique with dealers.
It is time to get compliant, but is seller financing doomed? I don't think so at all.
"A comment suggested a de minimis exception for businesses that lend or broker loans under a relatively low value, or low aggregate volume of transactions within a set time period. For the reasons stated above, we see no compelling reason to except any businesses or transactions based on an arbitrary, de minimis dollar amount or volume of transactions."
" FinCEN will work with other relevant regulatory agencies in the development of consistent compliance examination procedures, and in the future will provide public notice of other agencies* that will exercise delegated compliance examination authority with respect to certain classes of RMLOs, other designated companies, and other loan or finance companies."
* (CFPB and state and federal regulatory agencies)
"FinCEN believes that a “small business” exclusion or exception for businesses with fewer than five employees, or for businesses that satisfy some other arbitrary size, net worth or similar criteria, would perpetuate the present substantial gap in SAR reporting."
"Consistent with the NPRM, the Final Rule explicitly covers sole
proprietorships. For the same reasons that support the rejection of an exception for small
businesses, the Final Rule does not recognize an exception based on a business’s status as
a sole proprietorship or other kind of business entity under Federal or state incorporation
or tax laws. An exception for sole proprietorships likely would perpetuate, to some 15
degree, the SAR filing gap and risk adverse impacts on the mortgage markets. Thus, the
Final Rule does not incorporate any such exceptions for businesses based on their form of
organization."
"Section 1010.100(kkk) defines the key terms used in the Final Rule. The
definitions reflect FinCEN’s determination that the term “loan or finance company” should be limited, at this time, to RMLOs, and that AML program and SAR requirements should be applied first to these businesses, and later – as part of a phased approach –applied to other consumer and commercial loan and finance companies. With the
exception of the addition of explicit exclusions for government-sponsored enterprises and certain government programs and a slight change to the definition of residential mortgage originator, discussed below, the Final Rule adopts the definitions as proposed. In the NPRM, “residential mortgage originator” was defined as a person who
“takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain.” One commenter suggested that the proposed language “takes a residential mortgage loan application” was ambiguous as towho would be subject to the requirements. FinCEN intends the Final Rule to be broad in
scope and cover most non-bank residential mortgage originators, with the few exceptions recognized in the Final Rule and described in this notice. FinCEN intends the Final Rule to cover any business that, on behalf of one or more lenders, accepts a completed mortgage loan application, even if the business does not in any manner engage in
negotiating the terms of a loan. FinCEN also intends the Final Rules to cover businesses that offer or negotiate specific loan terms on behalf of either a lender or borrower, regardless of whether they also accept a mortgage loan application. Accordingly, the Final Rule modifies the proposed definition of “residential mortgage originator” slightly
to include “persons” who accept a residential mortgage loan application or that offer or negotiate terms of a residential mortgage loan.” The change made from the NPRM of replacing the term “take” with “accept” is intended to differentiate the Final Rule from the SAFE Act. The change from “and” to “or” is intended to ensure that persons who either accept an application or offer or negotiate the terms of a loan are covered. In
addition, FinCEN intends the Final Rule to apply to residential mortgage originators, regardless of whether they receive compensation or gain for acting in that capacity.
Accordingly, the phrase “for compensation or gain” in the proposed definition is removed from the definition in the Final Rule. These changes create greater differences between the definitions in this Final Rule and those used in the SAFE Act and other federal mortgage-related statutes. This was done intentionally to differentiate this Final Rule
from those statutes so that the interpretation of this Final Rule is not based on the interpretation of those statutes. FinCEN intends the definitions in the Final Rule and subsequent amendments thereto to be consistent with definitions in the SAFE Act and other federal mortgage-related statutes, only to the extent deemed appropriate to advance FinCEN’s mission, strategic goals, and policies. As discussed in the NPRM, the Final Rule does not contemplate coverage of an individual employed by a loan or finance company or financial institution, and provides an exception for individuals financing the sale of their owner-occupied real estate."
"The Final Rule applies to businesses, including sole proprietorships, not individuals employed by the business. Individuals employed by a loan or finance company that would not be subject to the rule including administrative assistants and office clerks who gather documents on behalf of a lender or originator."
"Section 1029.210 requires that each loan or finance company develop and implement an anti-money laundering program reasonably designed to prevent the loan or finance company from being used to facilitate money laundering or the financing of terrorist activities."
The above was quoted directly from 31 CFR Parts 1010 and 1029 RIN: 1506-AB02 as issued by FinCen in relation to the application of Anti Money Laundering Compliance Requirements. Obviously, FinCen is not in favor of de minims in relation to the SAFE Act or for Anti Money Laundering. Further, new rule propagations by the CFPB, have thrown non-lending retailers and community owners under the same bus. The date of expected compliance is August 16, 2012.
We believe that every community owner and retailer is expected to create and implement a Compliance Management Program to fulfill their new responsibilities and they are going to be expected to have it in place and operational by August 16th. It would be unrealistic to expect total immediate enforcement, but we would remind you the obligation is retroactive as are the fines and penalties. Operators that wait until others are caught to "get compliant" can expect fines and penalties from the required date of implementation to the date they finally became compliant.
How many people have actually taken the time to read about all of the above issues? Reading through them first and then carrying on a discussion might be a better way of going about this. Otherwise, everything stated is heresay or personal opinion.
The problem is, my staff gets paid to read and stay on top of all of this and there is a substantial cost for reliable and consistent access to the information. It is difficult, if not impossible, for the average community owner to do the same, let alone the smaller community owners and Lonnie dealers.
Doing a search for each of the items on the list brings up quite a bit of info on the internet. Reading through each of the items there seems to be a lot of paranoia over nothing concerning these issues. Chicken Little can go around saying the sky is falling and get people to believe in it happening.
Dale - I'm not happy going here with you. Anyone can also google both myself and our company. We are the real deal. We have major money invested and a number of employees who are also known in this industry. We have won awards and have been selected to speak on this topics by groups all over the country. What I'm saying is not one wit different than what MHI and its law firm is saying. It isn't any different that what the largest regulatory law firms in the country are saying. I guess all of us are wrong and you are the savior of the industry from all of us fear mongers, because you can google.
I'm fed up with people who choose to pretend that nothing is happening or pretend to be experts by virtue of reading what they can google. I suppose people could google "Medicine at Sea" and take someone's appendix out as the Great Pretender used the book (no internet) to do that during the Korean War, but it just might be considered a risky practice by most people. There is more to it than reading something on the internet, and while I have dressed out a lot of game and a lot of cattle in my youth, I would not begin to tell people I could operate on them. There is a word for such behavior - ultracrepidarianism.
I constantly hear from people complaining because, "no one is telling them anything" and while I agree our industry isn't very good at getting the word out, I would also agree that part of our industry isn't very good and listening to the people who are trying to help them. Sometimes the very people trying to help get called names - like "Chicken Little".
I gave a very few citations because of time and space to illustrate what the agencies involved are thinking. You gave none, nor did I read about any legal opinions that back you up. If you can get me a written opinion from a nationally known regulatory attorney to back up your post, I will pay his bill for you, apologize to you in my newsletter, and buy you dinner in Seattle at any place of your choosing.
Seems to be another case of the government working with lobby groups to create a high barrier of entry. Essentially what I'm hearing is that it is practically impossible to do seller financing. I know of no mortgage brokers in my area that will assist with this.
I personally do not think it is doomed. I do think there are plenty of people who refuse to believe they are going to have to do something new in order to continue, and as a result, they are creating confusion among others in the industry.
If you accept there are new laws and rules you MUST follow to avoid the wrath of the federal government, then you can look for solutions. Once you have identified potential solutions, then you can examine each to decide which of the solutions will work best for you and work to actuate that solution.
Chris, who started this thread is trying to put together a co-op captive finance company for smaller operators in North Carolina. Others are pursuing different solutions as illustrated in the thread listed above.
There are solutions that are relatively permanent and some, like lease option, that require many of the lesser expensive compliance steps, but not, (in many states) licensure which is the most expensive step of all, but may not survive recharacterization by the CFPB down the road. Lease option, in states where licensure is not currently required, gives an operator a chance to develop a Compliance Management System at a much lower cost and may give the operator time to build up the necessary capital (from profits) to move into licensure if, and when, required to do so.
If you are referring to retailers and land lease communities now being required to develop a Compliance Management Program, the costs of compliance are very low if the operator searches around. Our compliance program for them, which is a sort of do-it-yourself program with us supplying templates, reference materials, employee training programs, audit programs, etc will cost the operator about $500 to us and another $500-$750 in employee time to complete. There are other solutions, but, to the best of my knowledge they are a minimum of ten times that amount.
While no one likes spending money on compliance, the amounts are doable for retailers and communities that do not lend. I remember when some states began to license communities that many protested it was the end of land lease communities, yet in the 17 states that do license communities, they are still going strong. The same could be said for retailers and their licensing fees. Somehow, the strong always survive, while the whiners and the weak perish, leaving their wealth to the survivors to divide up.
We cannot change what is, but we can determine we will not lose without a fight. That is the attitude of a winner.
