S&P - Public Finance Criteria (2007). - The Global Clearinghouse

HousingMobile Home ParksStandard & Poor’s Ratings Services views mobilehome parks (MHPs) as a subset of bond ratings onunenhanced affordable housing (AHPs). However,there are unique issues with regard to MHPs thatdeserve special attention.Transaction structuresRating bond-financed MHPs is substantially differentfrom rating bond-financed unenhanced multifamilyprojects in that, in virtually all MHPs ratedby Standard & Poor’s, the collateral for the bondholdersis land only and not real estate improvements.Typically, the tenants in mobile home parksown their mobile homes and lease the land onwhich the mobile homes sit from the park owner.The tenants typically obtain a loan to buy themobile home, and the mobile home is pledged tothe lender that provides the acquisition loan.Therefore, the collateral for bondholders in ratedMHP transactions is land and a pledge of theground rent from the tenants for the mobile homepark spaces. The bondholders do not have any collateralinterest in the mobile homes themselves.Standard & Poor’s analysis of MHP bond transactions,therefore, depends to a great extent on theasset quality of the MHP over the long term and itsability to generate a strong revenue stream.Asset qualityOne factor unique to MHPs that will be given carefulattention is the size of individual mobile homespaces. Mobile home spaces should be of adequatesize to accommodate larger mobile home units (i.e.,at least 24 feet in width). The trend has been andwill continue to be the placement of larger units (atSite Visit and DocumentationIn conducting its review of an affordable housing project, Standard & Poor’s relies on a site visit to each property, a completeapplication including owner, property management, and oversight provider questionnaires, a review of legal documents includingany loan guarantees, subsidy contracts, real estate and bond documents, investment contracts, loan information and review ofspecific third-party reports prepared by independent third-party professionals. The site visit will include:■ Internal and external inspection of the project, including several apartments, amenities, basement, roofs, maintenance areas,elevators and stairwells, storage spaces, garbage collections and recycling facilities, security systems, recreational facilitiesand grounds.■ Interviews with the prospective owner, property manager, construction planners and supervisors, and■ A tour of the surrounding neighborhood with visits to comparable properties.The following reports should be prepared by qualified, independent third-party professionals and should be no older than six months:■ Structural engineering report prepared by a licensed engineer or architect in accordance with Standard & Poor’s guidelines.■ Environmental report in accordance with Standard & Poor’s guidelines, and■ A complete self-contained appraisal performed in accordance with USPAP guidelines by a MAI certified appraiser.This report should include a market and demand study prepared in accordance with Standard & Poor’s guidelines.Standard & Poor’s will review the following financial, legal, and loan documentation:■ Trust indenture■ Investment agreements■ Loan agreements■ Mortgage and mortgage note■ Assignment of leases and rents■ Relevant insurance policies■ Ground lease if applicable■ Management contract■ Construction contract if applicable■ Legal opinions■ Subsidy contracts, if applicable■ Standard & Poor’s owner profile and questionnaire■ Standard & Poor’s property management profile and questionnaire, and■ Any other relevant transaction document.268 Standard & Poor’s Public Finance Criteria 2007