Consumer Loans Receivable

6 Months Ended

Sep. 30, 2012

Consumer Loans Receivable/Inventory Finance Receivables and Allowance for Loan Loss [Abstract]

Consumer Loans Receivable

5. Consumer Loans Receivable

The Company acquired consumer loans receivable during the first quarter of fiscal 2012 as part of the Palm Harbor transaction. Acquired consumer loans receivable held for investment were acquired at fair value and subsequently are accounted for in a manner similar to ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). Consumer loans receivable held for sale and construction advances are carried at the lower of cost or market value. The following table summarizes consumer loans receivable (in thousands):

	September 30,			March 31,
	2012			2012
Loans held for investment (acquired on Palm Harbor Acquisition Date)	$	105,565		$	110,629
Loans held for investment (originated after Palm Harbor Acquisition Date)		627			511
Loans held for sale		5,033			4,534
Loans held—construction advances on non-conforming mortgages		5,381			3,865
Consumer loans receivable		116,606			119,539
Deferred financing fees and other, net		(293	)		(240	)
Consumer loans receivable, net	$	116,313		$	119,299

As of the Palm Harbor Acquisition Date, management evaluated consumer loans receivable held for investment by CountryPlace to determine whether there was evidence of deterioration of credit quality and if it was probable that CountryPlace would be unable to collect all amounts due according to the loans’ contractual terms. The Company also considered expected prepayments and estimated the amount and timing of undiscounted expected principal, interest and other cash flows. The Company determined the excess of the loan pool’s scheduled contractual principal and contractual interest payments over all cash flows expected as of the Palm Harbor Acquisition Date as an amount that cannot be accreted into interest income (the non-accretable difference). The remaining difference is accreted into interest income over the remaining life of the loans (referred to as accretable yield). Interest income on consumer loans receivable is recognized as net sales.

	September 30,			March 31,
	2012			2012
	(in thousands)
Consumer loans receivable held for investment – contractual amount	$	281,612		$	293,818
Purchase Discount
Accretable		(102,314	)		(106,949	)
Non-accretable		(73,275	)		(75,928	)
Less consumer loans receivable reclassified as other assets		(458	)		(312	)
Total acquired consumer loans receivable held for investment, net	$	105,565		$	110,629

Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected by CountryPlace. At the balance sheet date, the Company evaluates whether the present value of expected cash flows, determined using the effective interest rate, has decreased and, if so, recognizes an allowance for loan loss subsequent to the Palm Harbor Acquisition Date. The present value of any subsequent increase in the loan pool’s actual cash flows expected to be collected is used first to reverse any existing allowance for loan loss. Any remaining increase in cash flows expected to be collected adjusts the amount of accretable yield recognized on a prospective basis over the loan pool’s remaining life.

The changes in accretable yield on acquired consumer loans receivable held for investment were as follows (in thousands):

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance at the beginning of the period	$	103,385		$	115,471		$	106,949		$	—
Additions		—			—			—			118,335
Reclassifications from nonaccretable discount		2,460			—			2,460			—
Accretion		(3,531	)		(4,090	)		(7,095	)		(6,954	)
Balance at the end of the period	$	102,314		$	111,381		$	102,314		$	111,381

CountryPlace’s consumer loans receivable consists of fixed-rate, fixed-term, fully-amortizing single-family home loans. These loans are either secured by a manufactured home, excluding the land upon which the home is located (chattel property loans and retail installment sale contracts), or by a combination of the home and the land upon which the home is located (real property mortgage loans). The real property mortgage loans are primarily for manufactured homes. Combined land and home loans are further disaggregated by the type of loan documentation: those conforming to the requirements of GSEs, and those that are non-conforming. In most instances, CountryPlace’s loans are secured by a first-lien position and are provided for the consumer purchase of a home. In rare instances CountryPlace may provide other types of loans in second-lien or unsecured positions. Accordingly, CountryPlace classifies its loans receivable as follows: chattel loans, conforming mortgages, non-conforming mortgages, and other loans.

In measuring credit quality within each segment and class, CountryPlace uses commercially available credit scores (“FICO”). At the time of each loan’s origination, CountryPlace obtains credit scores from each of the three primary credit bureaus, if available. To evaluate credit quality of individual loans, CountryPlace uses the mid-point of the available credit scores or, if only two scores are available, the Company uses the lower of the two. CountryPlace does not update credit bureau scores after the time of origination.

The following table disaggregates CountryPlace’s gross consumer loans receivable as of September 30, 2012, for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):

	Consumer Loans Held for Investment								Consumer
	Securitized		Securitized				Construction		Loans Held
	2005		2007		Unsecuritized		Advances		For Sale		Total
Asset Class
Credit Quality Indicator
Chattel loans
0-619	$	1,354	$	880	$	905	$	—	$	—	$	3,139
620-719		20,177		13,634		1,110		—		—		34,921
720+		23,023		15,527		698		—		—		39,248
Subtotal		44,554		30,041		2,713		—		—		77,308
Conforming mortgages
0-619		—		—		309		189		—		498
620-719		—		—		1,563		3,431		3,584		8,578
720+		—		—		11		1,761		1,449		3,221
Subtotal		—		—		1,883		5,381		5,033		12,297
Non-conforming mortgages
0-619		97		850		2,622		—		—		3,569
620-719		2,119		7,515		5,125		—		—		14,759
720+		2,179		4,935		1,541		—		—		8,655
Subtotal		4,395		13,300		9,288		—		—		26,983
Other loans
Subtotal		—		—		18		—		—		18
	$	48,949	$	43,341	$	13,902	$	5,381	$	5,033	$	116,606

Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. Consumer loans receivable are located in the key states shown below with the corresponding percentage of loans aged 61 days or more:

September 30, 2012
				Aging 61 days or more
	Portfolio			Percent of state’s			Percent of total
State	concentration			loan balance			loan balance
Texas		42.2	%		0.86	%		0.36	%
Florida		7.2	%		2.92	%		0.21	%
New Mexico		6.7	%		1.87	%		0.12	%
Arizona		5.9	%		2.89	%		0.17	%
Alabama		5.5	%		1.45	%		0.08	%
California		2.1	%		3.33	%		0.07	%
All others		30.4	%		4.23	%		1.29	%
		100.0	%					2.30	%

The states of Florida, Arizona and California have experienced economic weakness resulting from the decline in real estate values. The risks created by these concentrations have been considered by management in the determination of the accretable yield and the adequacy of any allowance for loan losses. Other than Texas, no other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of September 30, 2012.