1) Who, What and Where: (Your name, formal title at the FinmarkUSA.com and where you are based).
1) Who, What and Where: (Your name, formal title at the Richard Ernst, President based in Dallas, Texas.
2) Background: (Educational/Professional snapshot before entering the factory-built housing arena.).
Attended Purdue University, Majored in Industrial Management and minored in Economics. I worked full time while attending school and 
3) When and How: (When and how you began in MH. Then briefly outline your career journey to MHI, along with the origins of FinmarkUSA.com).
I started my career in the industry as an account representative for Sebrite Corporation, a subsidiary of Foremost Insurance.
I followed that with a 10 year career with Safeway Corporation, a regional financial service company, rising to Executive Vice President.
When I realized the President and majority owner was quite happy being President, I left and formed my own company which at the time was called LOMAS Financial which was an acronym for Loan Origination, Marketing and Servicing. Some may remember Lomas and Nettleton Mortgage and they were not happy with my company name and paid me to change the name to Financial Marketing Associates, Inc.
4) What are your personal interests or hobbies? How do you like to spend non-work time?
Despite all of the business travel, we still love to travel. Also reading helps me to get lost from the issues of the day when needed.
5) One of your many career highlights is that you helped create an interesting program for independent community bankers. Tell us about that please.
Early in my career I called on regional banks and community banks in an effort to get them involved in manufactured home lending. I found that for every 100 banks I talked to maybe 2-3 would invite me back.
I learned that although they acknowledged that many of their customers purchased manufactured housing, they could not offer the terms needed and really wanted the same thing they had in the conventional mortgage business…..the ability to serve their customer, make fee income and then sell the loan in a secondary market.
I met with the Independent Community Bankers Association and convinced them to offer a private loan conduit program for their members. The Associates Housing Finance was their “take out” lender so banks could originate, then sell their loans without recourse. It was a wonderful program that I was responsible for all marketing and training across the country.
We enrolled over 400 banks and ran the program for 6 years until the Associates exited the manufactured housing market completely.
6) You created a joint venture program that included big name Well Fargo, please share some insights on that program.
Manufactured Housing customers wanting to purchase a home and place it on private property were continually confronted with banks and mortgage companies that may or may not offer mortgage financing.
The concept included three manufactured housing manufacturers; Commodore Homes, Liberty Homes and Pleasant Street Homes all based in northern Indiana. All three companies built quality products including a nice selection of modular product as well.
Wells Fargo provided all of the back shop work such as processing of credit applications, underwriting, documentation and funding of mortgage loans that qualified for their standard mortgage programs.
Wells also provided the warehouse facility to hold the loans until they were ultimately sold to Wells Fargo for inclusion in pools to be sold to Freddie Mac. This allowed retailers of homes from the three manufacturers a legitimate mortgage financing option for their customers that they could rely on.
The most unfortunate part of that JV was that at the time the mortgage market was on fire with lots of refinances in the conventional mortgage market. As a result Wells Fargo had difficulty keeping Loan Officers and Underwriters for this unit because the grass was much greener and substantially more money could be made doing refi’s rather than doing $125,000 manufactured housing loans.
We attempted to get Wells Fargo to agree to have loan officers work remotely in the market areas where the manufacturers had their greatest concentrations but Wells indicated that would interfere with the Wells Fargo offices. As a result, Wells requested and bought out the partners and closed the JV down after 3+ years.
7) You have had unique ties to manufactured housing associations, including MHI. Give us some insights on those and if you would dwell a bit on your perspective of the run up and accomplishing of MHIA 2000, including what the means, for those who don’t know! Before starting, we understand – and will remind our readers – that on this question and on others, that there are often facts that for reasons of confidentiality you will not be able to share.
When the National Manufactured Housing Finance Association merged into MHI, Tim Williams was Chairman and I was Vice Chairman. At that time I made a commitment to myself that as a Consultant in the Industry, I needed to be actively involved and hopefully let people determine for themselves if I was knowledgeable and could provide a non-biased perspective on a range of issues.
Through the years I have served in a variety of Chairmanships of both Financial Services and also the Government Relations Committee. I also served as Treasurer at one point for MHI.
As an Independent Consultant, I was unique in that I had no ties to a particular company. Walt Young indicated that the Board of Directors wished to hire me on an interim basis to serve as President of MHI.
The staff was in a state of flux with several staffers having already secured other employment.
I like to think that in my 7 months as the Interim I accomplished two primary goals.
First I brought stability to the staff and retained at least two staffers that had already committed to take other positions.
Secondly, MHI and MHARR were constantly feuding with each other and lobbying efforts on the hill were a joke. Members of Congress told us outright that we (MHI and MHARR) needed to get on the same page or nothing would be accomplished.
Thanks to Walt Young’s leadership and support I was able to create a good working relationship with MHARR. We jointly formed a working committee with members from each group and laid out a plan to get the MHIA 2000 plan finally passed in Congress.
It sounds simple but it wasn’t. There were many times both sides were frustrated but we kept it together and got it done. This is after years of trying to revamp and update the MH Federal Legislation. It was a good win for everyone.
8) When the industry needs an independent voice that is finance savvy, they routinely turn to you, Dick. Let’s walk through some recent history, starting with your perspective on the lending summit that was held in Elkhart, IN. For newcomers to MH and seasoned pros alike, outline the run up to the Elkhart Summit.
My recollection may be different from others but here is what I remember. Several of us in the Financial Services Division were actively involved in working with Barney Frank who was pushing for reform and update of the FHA Title I program. Dave Stevens was the FHA Commissioner and someone that in my view really “got it”. Many of his FHA staff, like Vicki Botts, and others came from the mortgage industry and they seemed to want to genuinely help “stand up” the FHA Proram and get the GNMA authority opened up again for Title I loans.
Richard “Dick” Ernst, sits at the “head of the table” next to Vicki Bott,
deputy assistant secretary for single-family housing at the Federal Housing Administration.
This finance summit was an ‘off agenda’ meeting at MHI’s 2010 Summer Session.
The room was a who’s who in manufactured housing financing and related.
Commissioner Stevens and then Congressman (now Senator) Donnelly worked with MHI to put the Summit in Elkhart together.
I was asked to present the Power Point Presentation that provided all of the critical statistics that define our industry and it’s slide in volume and market share. That provided a back drop for the need for this exchange of thoughts and ideas.
The real disappointment at the Summit was with those representing Federal Housing Finance Agency (FHFA) who was directing Fannie and Freddie in their efforts to overcome the billions in losses as a result of the housing meltdown. They clearly and without regret indicated that they were restricted from entertaining any “new form of financing” which meant…don’t count on us to help the industry in any way!
Unfortunately, Dave Stevens left soon thereafter and took over the Mortgage Bankers Association and many of his staff left too.
9) How did it feel to be named Industry Person of the Year? Tell us about other recognition that you’ve had over the years.
It was quite an honor since it was voted on by other members of the industry. It’s the kind of recognition that acknowledges the effort and commitment to the industry.
The other most rewarding recognition I have received is the respect and friendship I feel within the industry. I know and have worked with many CEO’s and others and feel their trust and interest in my perspective. We will leave it at that.
10) Communities and Retailers have been put in a tough spot by regulations surrounding Dodd-Frank, the SAFE Act and other rules at the federal and state levels. You are going to be heading up panel discussions at the Louisville Show and in Texas in January, tell our readers why they will want to attend mark their calendar and attend these events.
The Safe Act and the myriad of regulations coming from Dodd Frank will change the way this industry does business forever. It is crucial that everyone that is active in the industry understand the regulations and the impact on the way they do business.
Besides our panel presentation at Louisville, I will be actively involved in a big 2 day event in Dallas sponsored by TMHA with invitations going out to adjoining states. These events will occur at a critical time when these regulations take effect.
People have to understand that SAFE is regulated and enforced by each state and Dodd Frank is regulated and enforced by the Federal Government and the CFPB. Just because you comply with one does not make you in compliance with the other. It is complicated but we expect to present information in an easily understandable format so there is good take away on what to expect.
11) While some state associations are pretty aggressive at the grass roots level, others have execs who have the desire, but lack engaged members on topics like HR 1779. You are very involved in such issues, trips to Washington, discussions and meetings with regulators and elected officials. What can you say that will cause someone to pick up the phone, and call in support of HR 1779? Why should someone send an email or fax until their legislator signs on?
This is a topic I feel very strongly about. It was about 2 years ago at the Legislative meeting in Washington D.C. when so much discussion was getting legislative support for HR1779. I was talking with DJ Pendleton, the Texas Executive Director the fact that I felt very strongly that I thought we needed a dual effort of doing all we could do with the CFPB at the same time we were lining up legislative support for HR1779. DJ was also of the same mind, and I discussed it with Dick Jennison who indicated I needed to “sell the idea to the Executive Committee” because of the financial commitment required. I indicated that Texas felt so strongly about it that they were willing to help support it financially.
I then talked with Jason at MHI, Joe Stegmeyer, Tim Williams, Nathan Smith and Kevin Clayton asked me to discuss it with Tom Hodges.
The bottom line is that all agreed that effort was necessary. We could not have CFPB drafting regulations that could dramatically impact our industry without telling our story and trying to get CFPB to understand how different we were. We want other members of our industry to know we were doing everything possible.
I can honestly say the CFPB (Dodd-Frank) task force did everything it could to change the outcome. I am very proud of our effort. We had a few successes but nothing like we hoped for.
HR 1779 and whatever companion Senate Bill is introduced is our industry’s legislative effort to provide reasonable relief from the potential damage to the industry. It is that important. We knew going in that our efforts had to be mounted on both the Agency effort (CFPB) and on the Legislative front. We now have only the legislative left.
12) Leigh Abrams and Randy Rowe are among the many voices that MHProNews has interviewed that called for a national image campaign to advance manufactured housing. Sam Landy at UMH and CU Factory Built Lending have not only supported that call, but have taken the extra step of supporting the ManufacturedHomeLivingNews.com online image and educational effort. You know also know that Sam Landy, who in an interview with MHProNews said that given the need for affordable housing in the U.S., he can see manufactured housing return to shipment levels of 300,000 to 400,000 a year. Against that backdrop, do you think that the image of manufactured housing hurts us with potential lenders? Do outdated stereotypes keep us from advancing as rapidly as we might with elected officials and regulators?
There is no doubt that the stereotypical image of MH plays a huge roll in our efforts.
Every time you turn on the news after a storm and you hear about a “trailer park” flying away you roll your eyes and moan.
There is no question that the most affordable of our homes, generally speaking the single section home, is needed by many low to moderate income families looking for safe comfortable shelter for their families.
I just don’t know how big that market really is. I think it has it’s limits of maybe 100,000 to 150,000 annually max.
It’s when we begin to talk multi-section and modular is where I still think we are putting the limits on our own progress.
My attitude is if we are trying to reach the broad home buying public, the pent up demand for housing that so many speak of, my view is that we need to build houses that architecturally appeal to the broad audience.
I think we continue to build larger homes that still look like manufactured homes and if there is a stigma that exists do you think people are going to be attracted to those homes regardless of how well they are built? I don’t think so.
Once again that is a personal opinion and I am sure there are many others in the business that have different views.
13) Privately and publicly, we’ve discussed and you’ve indicated the fact that there is ‘no lack of capacity’ for manufactured home lenders to make loans. CU Factory Built Lending’s Barry Noffsinger pointed out that some 75% of the US has a credit score over 650. The RV industry sells 5 times more units a year than we do, and see mostly cash buyers and ace credit scores. So why do you think we see in manufactured housing so many sub 600 credit scores as applicants? What can we do to change that reality?
I think we really have to do some extensive focus group studies of prospective homebuyers with 650+ credit scores and find out why many of them do not look or even consider our homes. I won’t name names, but one industry veteran said “Dick, we build cheap houses for poor people.”
While that is a noble thing to do, it does limit you.
14) Warren Buffett famously told Kevin Clayton the following. “Kevin, it seems to me that the problem of your industry is resale.” At a recent lunch, three lenders at our lunch table all agreed that repossessions mean 50% or more in a loss on an MH, in large part due to the lack of cost-effective remarketing. Savvy home buyers also want to know what their exit strategy will be. Randy Rowe advocated for better remarketing, as part of his 5 point plan for industry recovery. From your perspective as a finance/marketing expert, outline why better resale or remarketing would be a win for lenders, customers and the industry.
It’s all about equity. If a customer feels they have equity in their home, they are less inclined to abandon it. They will protect it at all costs.
I am seeing community owners step up to the plate in an effort to reduce losses, preserve the home in their community so other residents feel they have the opportunity for retention of equity and the prospects of getting their money out or appreciation. It is a subject that requires a very lengthy discussion and debate but clearly is needed.
15) You heard Sam Zell in Chicago speak of the risks of FED policy and potential loss of our reserve currency status and what that could mean to our nation. Interestingly, ELS Chairman Zell pointed out that our industry could benefit if that sadly happened. It seems to me that manufactured housing is uniquely able to position itself to benefit, from oil booms, economic busts, etc.. Feel free to comment on Mr. Zell’s thoughts, but also – as a pro who has seen the industry evolve, do you think that the day may come that we could become first choice housing more often instead of the being the housing of last resort for so many?
As much as I love our industry it would be a sad day for this country if we lost our reserve currency status and the value of our dollar dropped precipitously.
I don’t think we have to be the first choice in housing but I would be delighted if we had an equal choice!
We have to do better at delivering what the customer wants. I will never forget Walt Young talking to an audience and indicating that while running Champion there would be various points during the year that his production people would be bringing him carpet, tile, and other samples to choose what they were going to be putting in homes. Walt said he realized then that they had it all wrong.
Instead of letting the customer decide…he as the senior executive was making the decision and if you knew Walt he was no interior decorator!
16) In the wake of big government over-reach and some pretty glaring disappointments, do you see signs that the pendulum of heavy regulation may be swinging in Washington DC back to more reasonable levels? What can we individually and collectively do to help move that pendulum? And let us commend you on your routine example of leadership and volunteerism in so many pro-industry activities!
Thank you for that.
I am very reluctant to say the pendulum may be swinging the other way. I read just today that Washington is issuing a new regulation, most of them up to a 1000 pages, every 2.5 hours. That is not something you turn around quickly and frankly we are not there.
You talk about volunteerism and I think I speak for a number of people who have been involved in the Dodd-Frank efforts and we need all the help we can get. I am amazed at the number of industry members that know personally a member of congress or a senator. We need to get these people engaged and pull out all the stops.
17) We are seeing commercial lending come back for financing manufactured home communities. We are seeing manufacturers team up with lenders, and are getting more involved in floor plan or other financing. What trends do you see that are finance connected and what opportunities and lessons do they hold?
I think the lesson is that more can be accomplished together, sharing risk. I have seen too many industry players drop out because they were left to do it alone and did not have the risk mitigation needed to have a favorable experience.
18) What closing thoughts or advice would you have for industry professionals who want to be progressive and solution oriented? What can individuals and companies do on the finance front that would make our industry’s future more secure? Feel free to mention how your services at FinmarkUSA.com could play a role in that brighter future for industry professionals!
We are beginning to see a sharing of risk and capital investment from non-finance players. I often make a statement that sometimes in not well received because it is a two edged sword. There are aspects of Dodd-Frank that while we expect these new regulations will cost the industry business, I do think the performance of the business will be improved significantly.
Will that offset the loss of business? Probably not in the beginning but if we can demonstrate our industry performs equally or better, no doubt more capital becomes available and the more capital we have the cost of capital drops and our customers benefit.
I hope in my 43 years in the industry I have demonstrated a depth of knowledge of the industry, the players, the product and certainly the critical elements for a successful finance program. I am a consultant and would love to work with the Industry’s pros for continued growth and success.
I have mentioned before that I have a profound respect for Kevin Clayton and Jim Clayton. They started from the ground up and learned how to do it the right way. They surrounded themselves with good people too. Who knows, maybe Kevin and I will work together someday! ##
