securities that I have paid much attention to have been the ones up for sale at any given time. A bond dealer could probably give some valuable insight into the overall market, but the manufactured housing bonds seem to be come in huge chunks that are bought by institutional investors. Oakwood's last AAA offering was presold (never actually hit the "open" market), which to me seems like good salesmanship and prudent marketing. The higher rated securities involve almost no risk because they represent a conservative percentage of the total securitization. Even CMH, undisputedly one of the most solid of the manufactured housing companies, frequently keeps their own lowest rated bonds; these bonds involve the most risk because they would be impacted first in the event of high default rates by mobile home purchasers.
Some folks think that the lower rated bonds represent the loans made to people who are most likely to default, but this is not really the case. My understanding of what actually happens is that all of the loans are put in one giant pool. The highest rated bonds have first claim to the total pool (akin to a first mortgage on a house), sell at the lowest interest rates, and offer the company the greatest return because they have the greatest interest rate spread. The interest rate spread is the difference between the average interest rate of the entire pool and the interest rate paid each particular bond issue. As the bond ratings decrease due to increased exposure (akin to 2nd, 3rd, 4th � mortgages), the interest rate paid on the bonds increases, so the take home spread for the company decreases. The lowest rated bonds are the most difficult to sell, but pay the highest interest; holding them, or at least holding them until someone will buy them at an acceptable interest rate, may represent a good investment for the company if it is not strapped for cash. The companies offering the securitiations could never allow a payment to go unmade regardless of the rating of the bond, even though the companies themselves are usually not directly liable; if any of the bonds defaulted, the company would loose their primary source of funding because nobody would buy their bonds at a reasonable price, and the results would not be pretty.
If the market gets to the point that CMH has any trouble with selling asset based securities, the industry will be in much deeper trouble than currently seems to be the case, and we could well have the blood bath that I do not expect but have seen predicted. Again, CMH will be a survivor of whatever happens, so its investors should have little to worry about over the long (and even reasonably short) haul. Oakwood, on the other hand, because it has much higher debt, could have much more severe consequences; they are making and have already made some major changes, so I am still optimistic about their future. My understanding is that the bond market has been somewhat volatile and unpredictable.
We will have some readers of this board who are much more knowledgeable than I--please feel free to correct me, offer better explanations, or add to anything I've posted