Help...I'm falling into MH paper and I can't get up! **Dirk, Terry, Lonnie, & John** - Posted by Mark_TX

Posted by David Alexander on March 06, 2000 at 19:22:48:

Why not? it’s not just about the payor, but about the fact that if you can get the dealer to add more collateral, guarantee the payments (means you now have two payors, the homeowner and the guarantor) you could end up in a better position than with a Lonnie deal.

If you sold off partial with a yield you could accept, you would then have someone that wants to protect the back end for themselves, they are still in the deal, and have to make sure you get paid before they do.

That is better than a lonnie deal in some ways. You have essentially hired an employee to make sure you get paid or you bank big time otherwise. The only downside side is possibly not being able to get yields in the 90% or better range I suspect.

I’m purely guessing but as the deal runs out further I’m sure this leads to buying the rest of the loan. By then seasoning takes place and you can either borrow against the paper, refinance it or sell it off at much lower yields.

David Alexander

Help…I’m falling into MH paper and I can’t get up! Dirk, Terry, Lonnie, & John - Posted by Mark_TX

Posted by Mark_TX on March 05, 2000 at 16:31:19:

Hey guys,

So I get some great advice from Terry, Dirk and Lonnie at the convention about MH’s and then John gets up there talking about the advantages of paper, and I think…“Alrighty then, I’m gonna create paper using Mobile Homes.”

My first deal consists of a guy who wants to move a home to his property…

–Deal still in the works–

So, I call a bunch of dealers and ask if they have any used pullouts for this guy to move to his land…well, in talking to some of the sales guys, they begin to ask me if I do financing. This would be for folks that can’t get approved to buy through Greentree/Consenco or whatever standard lenders are out there. I would never want to turn down an opportunity…So, I’m getting three packages on Monday.

My first question is… Are MH’s a good place to buy new paper? Then followed by a flurry of additional questions, are there any investors interested in financing new MH buyers. Are there any investors interested in financing new used MH buyers. Has anybody here ever done this? How should I structure the deals? What should I look for…

Currently I am working my way through Behle’s course on paper, and I am waiting for Lonnie’s books, but I would really appreciate any feedback y’all can provide since I will need to evaluate these packages tomorrow morning.

Thanx again!


You Guys May Be Missing some Opportunities! - Posted by Terry Vaughan

Posted by Terry Vaughan on March 06, 2000 at 13:41:49:


Don’t forget the power of negotiation. Remember the dealer might be so motivated, he/she will sell you “partials” on these notes. The next 12 to 24 months might be worth a good 40 or 50% yield to you, with him to back them up! That’s like holding a small 1st with a large 2nd behind you.

Also, what about additional collateral? OR, a solid Guarantor?

There are many ways to make these deals work. I always exhaust all of these possibilities before I pass on a deal.


Re: Help…I’m falling into MH paper and I can’t get up! Dirk, Terry, Lonnie, & John - Posted by Jacob

Posted by Jacob on March 06, 2000 at 12:24:11:

I would have to say that Brandi is exactly right. I use Conseco to finance all of my deals, and they have got to be the most flexible finance co. around. They sometimes even create plans to get buyers financed.

Trust me, if Conseco won’t touch them, there’s a reason for that.


Not to sound totally negative, but… - Posted by Brandi_TX

Posted by Brandi_TX on March 06, 2000 at 10:05:27:

…if a new MH buyer is turned down by Conseco (or whoever), why would you want to mess with it?

Coming from experience, here is how the typical process works when someone is shopping for a new MH:

Buyer goes to several lots, viewing several homes at each, usually allowing each dealer to pull their credit. The salesman will typically tell this buyer, “We can get this deal done - Just give me a deposit.”, in hopes that they will stop shopping anywhere else. Depending on how many times the buyer has been led through this “dance”, they are excited that they have found a savior in this miracle worker salesman.

The salesman will then proceed by “shopping this buyer” to several banks. Not looking (or caring) if the buyer gets the best rates, oh no, they are just praying for an approval - ANY approval.

If the buyer is a “bandit”, the banks will come back with a “NO WAY”. If the buyer is a “semi-bandit”, the banks may come back with a “YES, but…”. (The “but” being one or more conditions that the buyer must meet prior to an official approval is given.)

Example - Applicant wants a 65k new MH, approval comes back stating they are approved for a USED MH for no more that 45k with 20% down, must supply proof of employment, sign away the rights to their next born child, yada yada.

Anyway, so now this miracle worker of a saleman becomes a martyr. “Mr Buyer, I tried and tried to get you approved for the house you wanted… BUT… I worked real hard and I got you an approval…You can still have a home…”

Assuming this buyer will accept a Repo, and can come up with the 20%, they now have a place to live. If not, the buyer walks… or… (and here is the scary part, Mark) the salesman may get “creative”. He may thinks, “Hmmm, I cannot seem to get this person bought, I wonder if I call Mark if he would fund this? Just to be sure he will, why don’t I just fudge these figures and documents a bit… Yeah, that’ll work”

When this happens, hard tellin’ what you will get. False income verification. A bogus deed to property that doesn’t exist. Copies of back dated checks showing payments made to loans that never happened. The list goes on.

My point in all this is simply to ask: Are you prepared to handle all of this? Even Conseco, a company with resourses and systems to help protect them, has stuff like this pulled over on them. Call them and ask them for a Repo list sometime. Are you better prepared to “sniff out a rat” than they are?

Besides all that, if you have the 45k to loan on just one house, how many more smaller “Lonnie Deals” could you get done with the same cash?

Just my opinion.


NOTE This was not written to imply that ALL MH salespeople or dealerships do business this way. I have just had the unfortunate experience of seeing it done this way - way too many times.

GOLD MINE! - Posted by Terry Vaughan

Posted by Terry Vaughan on March 05, 2000 at 21:29:28:


Now you begin to see what I’ve been talking about for the past five years! Read the success story, “Cashing in on mobile home paper”:

It was this great opportunity that prompted me to write, “Cashing In”:

At the risk of sounding like I’m hawking a book - I suggest you buy it! It covers all aspects of working with dealers to buy mobile home notes.

Even if you don’t buy it, you’ve stumbled onto a “Gold Mine”.

But, becareful, you need to evaluate each note on its own value. Remember to satisfy the three needs for the paper buyer:

1)People (the payor)
2)Paper (is the note properly structured and legal)
3)Property (is the collateral good enough for you to own if you get it back?)

That’s a broad look, but there are many details to get familiar with.


Mobile home and Land “Combo’s” work well… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 05, 2000 at 20:46:01:

Financing older used mobile homes and even later model year homes where you are looking to finance a sub prime borrower on just the mobile home only are a challenge. This is why Lonnie’s program works so well in that arena. Many other lenders rerfuse to fill that niche.

When you are able to combine the financing lien on BOTH the mobile home and a land parcel then financing becomes easier and more funds are readily available.

In your situation, you have a prospective buyer of a home that evidently owns his /her own land. If they have a decent amount of equity in that land then you could arrange for the seller of the mobile home to move the home on to the lot and set it up. Then the seller of the MH would take back a 1st lien mortgage on BOTH the land and the mobile home as a “Combo” type lien. That mortgage would then be immediatlly converted into CASH at the time the closing takes place with you to earn a fee for putting it all together. A good note funder would be very interersted in this type of a lien.

This way of making the WHOLE collateral become greater in value than each of the parts is an excellent tool to use in the above scenario.

Michael Morrongiello

Re: Help…I’m falling into MH paper and I can’t get up! Dirk, Terry, Lonnie, & John - Posted by Glenn OH

Posted by Glenn OH on March 05, 2000 at 19:09:49:

The key to the Lonnie deals is BUY LOW, sell at retail, and carry paper. Without the mark-up, the returns are not “pretty good”. I think someone commented on a similar post that they only finance homes they own - or you will be innundated with people wanting you to get only banking returns.

Re: You Guys May Be Missing some Opportunities! - Posted by Terry Vaughan

Posted by Terry Vaughan on March 06, 2000 at 23:22:26:

All of the points you folks make are good ones.

I’m not disagreeing with you, I’m just pointing out that “any” deal can be tweaked to a point that it will work IF the players will work with you.

Great posts!

Re: You Guys May Be Missing some Opportunities! - Posted by Mark_TX

Posted by Mark_TX on March 06, 2000 at 21:43:19:

You will all have to forgive me…

When posting my original article I didn’t even really know what I was asking for…but, by the extensive knowledge of the people here, in the last 24 hours, I kind of have a handle on things.

I would be open to buying notes that have already been created by the dealership…whether on new or used MHs, but most likely on used. I have had conversations with other folks “off-line” and I think the philosophy is “If you don’t get the discount up front, don’t buy.”

Let’s say for example, I recieve information on a used MH that is being dealer financed for 10,000.00 I then buy the note for between 30%-50% of the face value of the collateral, in this case the trailer. Let’s average out at 4,000.00 There is my deal. I think… now if I have this wrong, please advise, because I want to make sure I am thinking the right way. I could then season the note for 12 months and sell it before the buyers default or I could keep it and hope they don’t…either way I come out ahead…if they default, the MH is mine to sell again and make more money and if they don’t I have cashflow…

But, to Brandi, Tony and Jacob’s point, I need to do my due diligence and verify the collateral.

Again, thanx for all the feedback! You guys saved me money today.

The first package I was given was on a new MH and the deal was not good. The dealership is going to put three used MH packages together and send them to me within the week. I will then evaluate them, line up buyers for the notes, if they are already seasoned and then do the deal :slight_smile:

I’m excited about the possibilities!


I thought the same thing Brandi did - Posted by Jacob

Posted by Jacob on March 06, 2000 at 18:01:13:

Maybe I mis-understood, but the impression I got from the post was the dealer wanted him to finance buyers conventional lenders wouldn’t touch.

My point (and Brandi’s) from the perspective of one that deals with Conseco on an almost daily basis was that if they are too bad for Conseco, they are un-touchable. Conseco is so flexible, it’s absurd. If they don’t want them, nobody should.

I highly agree with your take about partials. I happen to love partials, think they are absolutly brilliant. I doubt however that you would advocate buying partials on a borrower too bad for even Conseco. (Correct me if I’m wrong, Terry as I don’t pretend to speak for you.)


Huh? - Posted by Brandi_TX

Posted by Brandi_TX on March 06, 2000 at 15:40:12:


Sorry guy, but you lost me. (No surprise there, lol)

The notes we are talking about do not exist yet. Unless I totally missed Marks point, he is considering funding the purchase of new MH’s. I was addressing the risks involved when dealing with less than honest salespeople.

I read your article but, how would this apply for new MH buyers where the loan doesn’t yet exist because no lender will touch them? These dealerships are not holding the paper themselves, they are getting cashed out by the lender. What is the DEALER’s motivation? Wouldn’t that be the lender’s issue?


PS - Great convention, it was nice to meet you.

Re: You Guys May Be Missing some Opportunities! - Posted by Tony-VA

Posted by Tony-VA on March 06, 2000 at 15:38:37:

I agree. I have not passed on dealing with this MH Dealer. I know the type of personality I am getting into negotiation with. I will try other options to work out deals on these homes. The yield must be there for me to buy or else my money is better spent creating my own lonnie notes.

The point of my post was that Brandi was correct and that some dealers use those tactics. They are predatory both in the way they market their homes and their notes. I believe the best way to buy these notes is pay no more for them than I would have paid for the home if I were buying it with the intent of selling it lonnie fashion.


Re: Not to sound totally negative, but… - Posted by Mark_TX

Posted by Mark_TX on March 06, 2000 at 21:25:01:


Thanx a million for the feedback. I don’t take it as negative at all. I’m in the middle of the learning process and any information I receive is very valuable!

It’s like a post further down in the newsgroup speaking about Lonnie deals and the potential pitfalls…somebody commented on how we shouldn’t say negative things on this board. Well, I believe that you only consider information to be negative if you are ignorant. Information is neutral, it’s what you do with it that counts!

What you have done for me is probably save me thousands of dollars, if not more. Now, it doesn’t mean that I am going to stop pursuing this as a lucrative way to make money, but I now know what to be careful about.

Again, Brandi, Thank you!

btw–Hope all is well with you in your corner of TX :slight_smile:

Great Advice - Posted by Tony-VA

Posted by Tony-VA on March 06, 2000 at 10:25:43:

I too have seen this exact scenario used. Fortunetly for me, one of the office managers at this dealership had already purchased a Mobile Home from me. Makes you wonder why she had to come to me and not the dealer she worked for?

She mentioned that this was how they did business. I had not even mention my interest in their notes yet.

The owner of the company later called and asked me to take a look at his notes. He obviously thinks he has a great opportunity to dump some of his subprime notes on a new investor for FACE VALUE! I fell out of my chair when he mentioned this. He then had a salesman call and ask me to finanace some of the New Mobile homes they are selling. Have you ever had a conversation with the village idiot? That is how I would best describe how this conversation went.

Your advice is a true picture of the less then honorable side of mobile home dealers. It is something to keep in mind when dealing with them. I believe that paper may still be purchased from these dealers so long as we inspect the collateral and pay no more for the paper than we would have paid for the home in a typical lonnie deal transaction. Chances are we are going to get these homes back so it is best to look at the purchase of the paper as if we are really just buying the home.

Great advice.


Re: You Guys May Be Missing some Opportunities! - Posted by David Alexander

Posted by David Alexander on March 06, 2000 at 22:32:49:


You need to spend some time playing with your calcualtor, so that you can understand yield.

A good book for calculator gymnastics is Jimmy Napiers Invest in debt. I believe there is a post below or check the archives.

David Alexander