Land-Home business turn around input? all CFD and non Dodd Frank compliant

[Curt Smith]

Hi MHP/mobile folks. I'm looking to buy a 50+ mobile home park in GA this year. Along the way a broker presented a large land-mobile home deal, around 50 or more land-homes. A land-home operator is similar to a lot rent park, but the mobile homes titled on land are like sub-divisions / neighborhoods where an operator owns some, most or all of the real properties and the homes. In the old days the operator would use a contract for deed CFD at 15% or so to owner occupants.

My reading and discussions in MHP discussion boards finds that Dodd Frank's impact to the park's past practice of being the captive seller of homes has come to an end. Most are saying no changes are needed... Same is true in my view with the land-home operators. All those CFD's are now fairly toxic to buy.

I checked public records... This operator is doing table top CFD's no registering anything on each property. Only his name is on the warrantee deeds. Those land-home owners have no public record of any dealings with this operator... Which why Dodd Frank was written in part.

For park owners / want to be owners: http://recenter.tamu.edu/pdf/2052.pdf

http://www.mobilehomeinvesting.net/mobile-home-blog/2014-safe-act-and-dodd-frank-for-mobile-home-investors
The above's point is that if you owner finance 3 or less deals in 12 months and follow new steps you have an exemption from having to be a licensed mortgage originator.  But parks and land-home operators need to originate dozens of owner-occupied notes per year which is where they will get in trouble.  I don't believe doing 3 per entity will pass the it's a duck test by the state banking regulators.  If it walks like like a duck, talks like a duck, then it's doing business as if it's an un-licensed bank, limiting to 3 per entity or not...  No case law on this yet, but I can see this is where the "3 per entity vs 3 per natural person" debate will be settled, from the abusers like the parks.

My question to Dodd Frank / Park experts here is, if I where to buy this land-home operator, what would you do to change the business model to be Dodd Frank compliant. What steps. IE what would you do immediately post purchase to the 50 some CFD's / owners, 2nd step etc.

@Bill Gulley ll

@Brian Gibbons

Thanks for help in formulating a business turn around plan.
@Brian Gibbons

[Ken Rishel]

This is far too complicated to deal with in a brief response or two.

Bluntly, you need professional help to do legally what you want to do. You either need to hire a law firm that specializes in finance regulatory law, or a consultancy like ours to help you through the process or both.

First, someone needs to do an audit on the loans themselves to make sure they have sufficient value and then to decide what needs to be done to make them legal and enforceable.

Second, if it is worth it to you, you need to form a captive finance company. That will take, with very good outside help, anywhere from 45 days to 6 months depending on how quickly you can do what is required. That finance company will need to employ a MLO or you or one of your employees will need to get licensed as an MLO.

I would do nothing about the existing loans until you had the proper licensure and had the company set up properly which would include a Compliance Management System as required by law.

My final though is you should not buy these loans without a very deep discount, and if you are not planning on generating 12 or more additional loans a year through the park purchase and/or more land home loans, you should pass altogether on the land/home portfolio.

Chattel lending and land home lending are two different animals with different legal protocols and documents and interest rates. Only a small percentage of the RCG client base does both, and they are primarily high volume retailers who are seller financing 30-100 loans every year.

If you are just doing chattel loans in a community you own, there are other easier and less costly solutions regarding financing homes in a community. Feel free to email me and view our Linkedin materials and our website.