Lonnie Deals - Then and Now - The original method won't work

[Ken Rishel]

First of all, I believe Lonnie Scruggs, was a great man who, while he did charge for his knowledge, made a whole lot of people a whole lot of money. I would never try to take that away from him.

Second, through no fault of Lonnie's, times have changed. The federal government of the 50s and the 60s and even the 70s is no longer small business friendly. They know they cannot be cost effective in regulating and taxing small business so they want it gone. Accordingly, they are more and more aggressive in regulating small businesses and building in costs of regulation that make it difficult, if not impossible, for small business to afford the cost of regulation.

Third, I know no one likes change - especially when it requires either spending money they hadn't planned for, or worse, quitting a business they depend on for their livelihood. The problem with the type of magical thinking that appears both in this forum and many other places is it is dangerous. It is akin to teenagers thinking, " I can't get pregnant (or she can't get pregnant) if we only do it just this once without protection".

So, in a series of posts to this thread, I am going to try to outline the dangers for all to see, to at least warn those that read it what they are up against. This will take some time so it won't all show up today or tomorrow, but I will continue to post until all of it is laid out.

Fourth. I do own a national consulting company that helps people with all of this. I am not posting to troll for business. Most of you, I believe, would not be able to justify most of our costs, and I have little or no expectation that all of you will want to engage us. We do quite well working with retailers and community owners who have the volume to afford our services. I will, however, give general ideas of costs when it seem appropriate and try to quantify how much volume it takes to justify compliance.

I hope all of this will help.

[Ken Rishel]

The first Compliance Issue People Paid Attention to - The SAFE Act

The SAFE Act drug those engaged in the sale and chattel financing into the same world as those engaged in the sale and finance of real estate. More importantly, it created an awareness of the manufactured housing industry among regulators of how we operated.

Some leaders in the manufactured housing industry believed that every salesperson was going to need to apply for, test for, and get an MLO in order to even sell manufactured homes. Our company was the only reputable source that disagreed.

We did, and do agree, that an MLO license is mandatory for those who also seller-finance manufactured homes. We also know that those who wish to seller finance manufactured homes need to form a totally separate company to handle the financing. If they do not, anyone who works in sales, will, in fact, need an MLO which as we will post later creates as many problems as it tries to solve.

Obtaining a license as an MLO is expensive. In most states, the first time licensing will run around $4,000.00, and the truth is, many people selling manufactured homes would never qualify for such a license. In addition to manditory study, an applicant has to pass both a federal and state examination, which is not terribly easy to pass. They have to submit fingerprints and fill out a history form for submission to the FBI to check on their criminal history. They have to agree to a credit check that each state sets its own standards for. Over 1/2 of the states require a FICO score over 700 on the applicant. Then there is the required bonding.

At the time the SAFE Act was passed, states were far from uniform in the way they handled chattel lending for manufactured homes. Arizona required no license at all if the loan was originally over $5,000. Other states had very expensive and very complicated licensure. Many states had a special kind of license for seller finance that was cheap and easy to obtain. Unfortunately, the quasi government group that administers the MLO licensing wants MLOs to work for a licensed lender and they refused and still refuse to accept seller finance licenses because they want everyone to work for either a licensed Mortgage Broker (where permitted by state law and function) or a licensed Mortgage Lender. A number of states are still scrambling to change their state laws to accommodate NMLS in their demands, and there are a number of temporary fixes in place until they can accomplish the changes. That does not mean that MLOs or Lenders, or people who are doing nothing, are off the hook.

Bear in mind, that in many states, lending without a license, is a felony. Most states have prescribed fines that are not minor, and the possibility of a prison sentence is not out of the question. Also bear in mind, while the state may not put very many people into prison, it gives them a very strong negotiating position regarding fines and penalties as was evidenced in a recent state action in Wisconsin as reported in the Chattel Finance Newsletter and also by the Wisconsin Housing Alliance in their member newsletter.

If you are not willing to obtain an MLO and the appropriate lending license for your state or states, you should not be engaged in Lonnie Deals anymore.