Magazine article American Banker

Centex Forms New Division to Lend on Prehab Homes

Magazine article American Banker

Centex Forms New Division to Lend on Prehab Homes

Article excerpt

Centex Corp. is the latest entrant in the manufactured-home loan market. The Dallas home builder and mortgage originator last week launched Centex Finance Co. and named Mick McGlothlen, a veteran of BankAmerica Corp.'s manufactured-home unit and of Green Tree Financial Corp., to head it.

Centex's move comes at a difficult time for the sector. Green Tree, the industry leader, announced in November that it would take a $150 million charge to cover losses from unexpected loan prepayments. The disclosure by Green Tree, which originated $4.9 billion of manufactured-housing loans in 1996, sent the stock of many subprime finance specialists into a tailspin.

The trouble came on the heels of BankAmerica's decision in October to put its unit-the second-largest in the sector, with $3 billion of manufactured-home loans-on the auction block.

Some analysts expressed concern about prospects for a new company in an increasingly competitive business. "I don't know if the industry needs another lender," said Jeff Evanson, an analyst at Piper Jaffray Inc. "Unfortunately, lending is a commodity business. An increase in supply without an increase in demand means declining margins."

Mr. McGlothlen, who joined Centex in September after 11 years at Green Tree and eight at BankAmerica Housing Services, said Centex will not be as aggressive in its accounting as the competition. Most analysts were optimistic that Centex could avoid the sector's pitfalls.

"Home builders generally have much more conservative accounting practices than someone like Green Tree," said James Wilson, an analyst at Jefferies & Co. …

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