Manufactured housing woes continue, and appraisers are part of the solution

According to Asset Securitization Report, 15 percent of manufactured homes shipped in 2003, or 21,000 units, are in repossession inventory. Citing Standard & Poor's analysts, the report said two thirds of Asset Backed Securities (ABS) downgrades over the last 18 months are attributable to the manufactured housing sector; and 80 percent of ABS defaults during that time were on manufactured housing bonds.

We reported in June that the MH sector was poised for a rebound, owing to new capital entering the market and investors and dealers learning (the hard way) from past mistakes. According to Asset Securitization Report, underwriters are "paying more attention to the appraisals they receive from brokers and dealers, and have made changes to their own internal scorecards as well."

We told you how Fannie Mae had created a program that was expected to increase funds available for MH loans by 33 percent, and that Warren Buffett had spent $2 billion to acquire one of the leading MH dealers and rescue another from Chapter 11 bankruptcy. In addition, another market leader, Champion Homes, recently completed a restructuring that trimmed staff, cut costs and redid compensation in such a way that it's ready to begin emerging from the red.

Part of the strategy going forward, interim CEO Albert Koch told investors, was to shift away from HUD code production to emphasize modular sales, in an effort to "appeal to the broader housing market, where consumer financing is less of an issue and appraisals are more consistent and readily attained."

Doomsayers who foresee a coming foreclosure catastrophe and think the blame will be pinned on appraisers should take a close look at the manufactured housing debacle of the last few years. As its survivors emerge, they're talking about relying on appraisers more, not less.