XML 21 R9.htm IDEA: XBRL DOCUMENT

CONSUMER LOANS RECEIVABLE

9 Months Ended

Sep. 30, 2024

CONSUMER LOANS RECEIVABLE

CONSUMER LOANS RECEIVABLE

3. CONSUMER LOANS RECEIVABLE

Consumer loans receivable result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations. Consumer loans receivable generally consist of the sales price and any additional financing fees, less the buyer’s down payment. Interest income is recognized monthly per the terms of the financing agreements. The average contractual interest rate per loan was approximately 13.1% and 13.2% as of September 30, 2024 and December 31, 2023, respectively. Consumer loans receivable have maturities that range from 2 to 30 years.

The Company reviews loan applications in an underwriting process which considers credit history, among other things, to evaluate credit risk of the consumer and determines interest rates on approved loans based on consumer credit score, payment ability and down payment amount.

The Company uses payment history to monitor the credit quality of the consumer loans on an ongoing basis.

The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections. The liabilities associated with these escrow collections totaled $12,700 and $10,104 as of September 30, 2024 and December 31, 2023, respectively, and are included in escrow liability in the accompanying balance sheets.

Allowance for Loan Losses—Consumer Loans Receivable

The allowance for loan losses reflects management’s estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the balance sheet. An allowance for loan losses is determined after giving consideration to, among other things, the loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience.

The allowance for loan losses is comprised of two components: the general reserve and specific reserves. The Company’s calculation of the general reserve considers the historical loan default rates and collateral recovery rates for the last three years and any qualitative factors both internal and external to the Company. Specific reserves are determined based on probable losses on specific classified impaired loans.

The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which generally is when either principal or interest is past due and remains unpaid for more than 90 days. Management implemented this policy based on an analysis of historical data, current performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days. Payments received on nonaccrual loans are accounted for on a cash basis, first to interest and then to principal, as long as the remaining book balance of the asset is deemed to be collectible. The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current.

Impaired loans are those loans for which it is probable that the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans, or portions thereof, are charged off when deemed uncollectible. A loan is generally deemed impaired if it is more than 90 days past due on principal or interest, is in bankruptcy proceedings, or is in the process of repossession. A specific reserve is created for impaired loans based on fair value of underlying collateral value, less estimated selling costs. The Company uses various factors to determine the value of the underlying collateral for impaired loans. These factors include: (1) the length of time the unit remained unsold after construction; (2) the amount of time the house was occupied; (3) the cooperation level of the borrowers (for example, loans requiring legal action or extensive field collection efforts may have a reduced value); (4) the physical location of the home; (5) the length of time the borrower has lived in the house without making payments; (6) the size of the home and market conditions; and (7) the experience and expertise of the particular dealer assisting in collection efforts.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the collateral is recorded at the same amount as the principal balance as the loan. The fair value of the collateral is then computed based on the historical recovery rates of previously charged off loans, the loan is charged off and the loss is charged to the allowance for loan losses. At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes from the consumer loan portfolio totaled $3,986 and $2,215 as of September 30, 2024 and December 31, 2023, respectively, and are included in other assets in the accompanying balance sheets.

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following:


		As of September 30,			As of December 31,
		2024			2023
Consumer loans receivable		$	169,903		$	159,738
Loan discount and deferred financing fees			(2,414)			(2,473)
Allowance for loan losses			(668)			(765)
Consumer loans receivable, net		$	166,821		$	156,500

The following table presents a detail of the activity in the allowance for loan losses:


		Three months ended September 30,						Nine Months Ended September 30,
		2024			2023			2024			2023
Allowance for loan losses, beginning of period		$	526		$	867		$	765		$	830
Provision for loan losses			77			(71)			(345)			(134)
(Charge offs) recoveries			65			(8)			248			92
Allowance for loan losses, end of period		$	668		$	788		$	668		$	788

The following table presents impaired and general reserve for allowance for loan losses:


		As of September 30,			As of December 31,
		2024			2023
Total consumer loans		$	169,903		$	159,738
Allowance for loan losses		$	668		$	765
Impaired loans individually evaluated for impairment		$	2,961		$	1,565
Specific reserve against impaired loans		$	656		$	562
Other loans collectively evaluated for allowance		$	166,942		$	158,173
General allowance for loan losses		$	12		$	203

As of September 30, 2024 and December 31, 2023, the total principal outstanding for consumer loans on nonaccrual status was $2,961 and $1,565, respectively. A detailed aging of consumer loans receivable that are past due is as follows:


		As of September 30,					As of December 31,
		2024			%		2023			%
Total consumer loans receivable		$	169,903		100.0		$	159,738		100.0
Past due consumer loans:
31 - 60 days past due		$	1,329		0.8		$	624		0.4
61 - 90 days past due			554		0.3			149		0.1
91 - 120 days past due			354		0.2			123		0.1
Greater than 120 days past due			2,607		1.5			1,449		0.9
Total past due		$	4,844		2.8		$	2,345		1.5

We evaluate the credit quality of our consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting generally is based on borrower payment activity relative to the contractual

terms of the loan. The following table disaggregates the outstanding principal balance of consumer loans receivable by credit quality indicator based on delinquency status and fiscal year of origination:


		Year of Origination
		2024			2023			2022			2021			2020			Prior			Total			% of Portfolio
< 30 days past due		$	24,107		$	29,216		$	22,478		$	19,410		$	12,325		$	57,523		$	165,059		%	97.2
30-90 days past due			141			276			831			326			—			310			1,884			1.1
> 90 days past due			—			520			365			1,075			104			896			2,960			1.7
Total		$	24,248		$	30,012		$	23,674		$	20,811		$	12,429		$	58,729		$	169,903		%	100.0