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Banks Strike Up Manufactured-Housing Talks
Asset Backed Alert, Harrison Scott Publications Inc. (April 2, 2010)

The manufactured-housing sector is poised to generate its first securitization in more than a year.

Investment banks have been talking to once-active issuers, including Green Tree Servicing and Vanderbilt Mortgage, about possible deals of perhaps $150 million to $500 million each. Some Wall Street institutions are also interested in stepping in as issuers themselves. The first offering could hit the market in the coming weeks. Deutsche Bank is involved, although it's unclear if the bank would be the issuer, the underwriter, or both.

Industry players expect the upcoming transactions to start with offerings meant to clear out "legacy" manufactured-housing loans that prospective issuers have been holding for 3-5 years. By the end of 2010, the focus of the transactions would shift to funding credits written within the preceding 12 months or so.

Manufactured-housing loans were once among the most commonly securitized receivables, accounting for $96.2 billion of asset-backed bond supply dating back to 1987, according to Asset-Backed Alert's ABS Database. But activity in the sector began to taper off around the turn of the century, as borrower performance sagged and the mobile-home market faced a glut of units. Deals became even scarcer following the 2002 bankruptcies of Oakwood Homes and then-Green Tree parent Conseco Financial.

Green Tree was the last company to complete a manufactured-housing securitization, selling $304 million of bonds via underwriter Barclays in September 2008. That issue, which came five years after Green Tree broke off from Conseco, concluded a prolific 16-year run in which the St. Paul, Minn., company raised $29.2 billion through such offerings.

Vanderbilt last issued in February 2003, placing $290 million of bonds via Bear Stearns. Overall, the Maryville, Tenn., company's securitization program produced $9.8 billion of deals over a nine-year stretch.

So why are issuers suddenly interested in securitization again, at a time when most mortgage-related deals are viewed as toxic? Some need new funding sources, as the availability of warehouse lines and commercial-paper conduit facilities has shrunk amid the global financial crisis. Underwriters also report that investor demand for manufactured-housing paper is actually on the rise, as stronger servicing practices have aided loan performance lately. Indeed, while trading is light, certain top-rated bonds in the asset class are changing hands on the secondary market at par or higher. "What's old is new again," one buysider said.

Vanderbilt could also have an edge as the lending affiliate of Clayton Homes, which is owned by Warren Buffet's Berkshire Hathaway.



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