2019: How will the new Fannie Mae and Freddie Mac programs for manufacturing housing affect Clayton?

JONATHAN BRANDT: Freddie Mac and Fannie Mae have new financing programs for manufactured home loans that I’m guessing could finally put purchasers of those homes who need mortgages on a somewhat more level playing field with those buying site-built homes.

How positive an effect do you expect these new programs to have on manufactured home demand? And how might the programs affect Clayton’s sizable profits from lending? Will Clayton sell more loans to Freddie and Fannie, and does that help profits even if spreads compress?

WARREN BUFFETT: Well, it may not help profits, but it would — it definitely is good if the Freddie and Fannie are authorized to do more lending against manufactured homes.

Manufactured homes are a very reasonable for people to get decent housing and have a home. And they are hard to finance to some degree. The local banks frequently do it, but the big lenders haven’t wanted to do it. They are —

There is the possibility, or the likelihood, that Freddie and Fannie are going to expand. We already sell — I don’t know whether it’s 10 million a month of loans or something like that — to Freddie and Fannie.

But it would be very good for America, in my view, if Freddie and Fannie did more in that area. Obviously, we would sell some more homes, but we would lose financing, and we might come out behind, we might come out ahead. But I think it would a good thing to do. Charlie?

CHARLIE MUNGER: Well, I think Freddie and Fannie will finance more and more homes, and I think they’ll do it more and more of it through Clayton. And they’ll do it because Clayton is very trustworthy, and will do a very good job at making good housing at cheap prices for people.

And I think Clayton will get bigger and bigger and bigger as far ahead as you can see. And the guy’s young, he doesn’t look like Warren and me. Not at all.

WARREN BUFFETT: We’ve got a perfect managerial group at Clayton, and we’re expanding our site-built homes. We just closed on a builder a couple — a few days ago. And we now have nine different — I believe — nine different site-built home operations, and we didn’t have any a few years ago.

And we think extraordinarily well of Kevin Clayton and his group. Our directors met last year in Knoxville and viewed the Clayton operation for the second time. So, we like the idea of Clayton expanding, and we like the idea of more people having very affordable housing.

During the 2008 and ’09 recession, our borrowers — who had very low FICO scores on average, I mean compared to typical home buyers, and they — if they kept their jobs, they made the payments. I mean, they wanted that home, and the home was an enormously important item to them. And we had various programs that helped them as well.

But our loan experience was far better than people anticipated under the stress that existed then. But it was because a home really means something to people. And absent losing jobs or sickness — and, like I say, we have some programs to help people — they make the payments, and they have very decent living.

But they would get that even cheaper if Freddie and Fannie expanded their programs. And, like I say, I hope they do.