What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-05-31 compared with 2021-05-28 · 124 added, 124 removed, 258 unchanged (49% of the section changed)

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Headquartered in Phoenix, Arizona, we design and produce factory-built homes primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers.

We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny.

We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.

We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments.

Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood and MidCountry.

We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures.

Our finance subsidiary, CountryPlace Acceptance Corp.

("CountryPlace"), is an approved Federal National Mortgage Association ("FNMA" or "Fannie Mae") and Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") seller/servicer, and a Government National Mortgage Association ("GNMA" or "Ginnie Mae") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.

Our insurance subsidiary, Standard Casualty Co.

("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes.

Our insurance subsidiary, Standard Casualty Company ("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes.

The terms "Cavco," "us," "we," "our," the "Company," and any other similar terms refer to Cavco Industries, Inc.

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This assembly-line process is designed to be flexible in order to accommodate customer requested customizations.

Our operations include 20 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions and we distribute our homes through 40 Company-owned U.S.

Our operations include 26 homebuilding production lines located throughout the United States and we distribute our homes through 45 Company-owned U.S.

retail stores and a network of independent distribution points in 48 states and Canada.

Thirty-two Company-owned retail stores are located in Texas.

Thirty-one Company-owned retail stores are located in Texas.

On September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations.

The addition of Commodore expanded our geographic reach into the Northeast U.S.

and enhanced our presence in the Midwest and Mid-Atlantic markets.

It also expanded our reach to modular home customers, as their home production is generally split between manufactured and modular housing.

Implementation of best practices of the Company and Commodore are expected to create efficiency improvements across our operations.

In addition to our proven existing processes we can bring to the Commodore operations, we believe Commodore has developed and implemented advanced manufacturing technologies that will lead to improvements to Cavco's operations.

Commodore also participates in commercial lending operations with its dealers, and we have continued most of these programs after acquisition.

The transaction was accounted for as a business combination and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.

CountryPlace originates and services single-family, conforming and non-confirming residential mortgages and home-only loans, for itself and others.

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In addition to writing direct policies, Standard Casualty assumes and cedes reinsurance in the ordinary course of business (see Note 14 to the Consolidated Financial Statements).

Our operations are generally managed on a decentralized basis with oversight from the home office.

This decentralization enables our operators the flexibility to adapt to local market demand, be more customer focused and have the autonomy to make swift decisions, while still being held accountable for operational and financial performance.

In March 2020, the World Health Organization declared the novel coronavirus COVID-19 ("COVID-19") a global pandemic.

As our business was considered essential, we continued to operate substantially all of our homebuilding and retail sales facilities while working to follow COVID-19 health guidelines.

We minimized exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve our customers.

Operational efficiencies have declined due to managing higher and largely unpredictable factory employee absenteeism, hiring challenges and building material supply shortages.

Accordingly, our factory capacity utilization rate fluctuated during the fiscal year and was at approximately 75% during the fourth fiscal quarter of 2021, lower than pre-pandemic levels of more than 80%.

Company-owned, and most independently owned, retail stores remained open for business since the onset of the pandemic, and sales order activity was exceptionally strong during most of fiscal year 2021.

Home sales order rates during the second and third fiscal quarters were nearly 65% higher than the comparable prior year quarters, and nearly 50% higher for the fourth quarter.

This increased order volume is the result of more well-qualified home buyers making purchase decisions, supported by reduced home loan interest rates.

The increase in orders outpaced production and raised our home order backlog at April 3, 2021 to approximately $603 million in wholesale sales values, up $479 million from $124 million one year earlier.

The financial services segment also maintained operations since the onset of the COVID-19 pandemic, largely through the implementation of work-from-home solutions.

In addition to accepting and processing new applications for home loans and insurance policies, the financial services operations continue to assist customers in need by servicing existing loans and insurance policies while complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.

It is difficult to predict the future impacts of the COVID-19 pandemic on housing demand, employee availability, our supply chain or the Company's performance and operations.

We continue to focus on developing production growth opportunities by working to improve our production capabilities and processes and adjusting product offerings.

We strive to balance the production levels and workforce size with the demand for our product offerings to maximize efficiencies.

Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face a major challenge in overcoming labor-related difficulties in the COVID-19 environment.

However, we are continually reviewing wage rates of our production employees and have established other monetary incentive and benefit programs to en sure competitive compensation.

We are also working to more extensively use online recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.

See Note 23 to the Consolidated Financial Statements for financial information regarding the Company's business segments, factory-built housing and financial services, which are also discussed below.

Business Strategies

Our operations are generally managed on a decentralized basis with oversight from the home office.

Our marketing efforts are focused on providing manufactured homes that are customizable and appeal to a wide range of home buyers, on a regional basis, in the markets we serve.

The primary demographics for our products are entry-level and move-up buyers and persons age 55 and older.

We also market to special niches such as subdivision developers and vacation home buyers.

We also market to special niches such as subdivision developers and second home or vacation home buyers.

We focus on developing and maintaining the resources necessary to meet our customer's desire for varied and unique specifications in an efficient factory production environment.

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We build homes of superior quality, offer innovative designs and floor plans, demonstrate exceptional value, provide the engineering and technical resources to enable custom home building and focus on responsive and efficient customer service after the sale.

We strategically expanded our factory operations and related business initiatives primarily through the acquisition of other industry participants, which has enabled us to participate in the affordable housing space on a national basis.

A majority of our products are constructed in accordance with the National Manufactured Home Construction and Safety Standards promulgated by HUD ("HUD code").

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Most of these homes are single-story and generally range in size from approximately 500 to 3,300 square feet, but may be larger in the case of multi-level modular homes.

In fiscal years 2021 and 2020, we sold 14,214 and 15,100 factory-built homes, respectively.

Each home typically contains a living room, dining area, kitchen, one to five bedrooms and one or more bathrooms, is equipped with central heat and hot water systems, kitchen appliances, floor coverings and window treatments.

Upgrades can include fireplaces, central air conditioning, tile roofs, high ceilings, skylights, hardwood floors, custom cabinetry, granite countertops and eco-friendly elements.

We also offer a variety of structural and decorative customizations to meet the home buyer's specifications.

We also offer a variety of structural, decorative and energy efficient customizations to meet the home buyer's specifications.

With manufacturing facilities strategically positioned across the nation, we utilize local market research to design homes to meet the demands of our customers.

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We have developed engineering systems that, through the use of computer-aided technology, permit customization of homes and assist with product development and enhancement.

We work with a variety of partners to meet the expanding range of housing needs, including a home buyer's private land, planned neighborhoods, recreational or resort properties and workforce accommodations for agriculture and industry.

We work with a variety of partners to meet the expanding range of housing needs, including home buyer's private land, planned neighborhoods, recreational or resort properties and workforce accommodations for agriculture and industry.

We employ a concerted effort to identify niche market opportunities where our diverse product lines and custom building capabilities provide us with a competitive advantage.

We are focused on building quality, energy efficient homes for the modern home buyer.

Our green building initiatives involve the creation of an energy efficient envelope, including higher utilization of renewable materials.

These homes provide environmentally-friendly maintenance requirements, typically lower utility costs, specially designed ventilation systems and sustainability.

We also build homes designed to use alternative energy sources, such as solar and wind.

From bamboo flooring and tankless water heaters to solar-powered homes, our products are diverse and tailored to a wide range of consumer interests.

Our green building initiatives involve the creation of an energy efficient envelope, including higher utilization of renewable materials and provide lower utility costs.

We also build homes designed to use alternative energy sources, such as solar.

Once a factory-built home is built at our facilities, it is then generally transported by independent trucking companies either to a retail sales center, planned community, housing development, work site or the home buyer's site.

Distributors or other independent installers are responsible for placing the home on site and, in most instances, arranging for connections to utilities and providing installation and finish-out services.

Distributors, or other independent installers utilized by us for homes sold through our Company-owned retail stores, are responsible for placing the home on site and, in most instances, arranging for connections to utilities and providing installation and finish-out services.

Although manufactured homes are designed to be transportable, cost considerations result in very few being moved from their original site after installation.

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Manufacturing Operations .

Our manufacturing facilities employ from 100 to 350 employees each.

Our manufacturing facilities employ between approximately 100 to 350 employees each.

Most homes are constructed in one or more floor sections or modules on a permanently affixed steel or wood support chassis.

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We operate 26 homebuilding production lines in Millersburg and Woodburn, Oregon;

Nampa, Idaho;

Riverside, California;

Nampa, Idaho;

Phoenix and Goodyear, Arizona;

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Montevideo, Minnesota;

Nappanee, Indiana;

Dorchester, Wisconsin;

Nappanee and Goshen, Indiana;

Lafayette, Tennessee;

Martinsville and Rocky Mount, Virginia;

Douglas and Moultrie, Georgia;

Shippenville and Emlenton, Pennsylvania;

Martinsville and Rocky Mount, Virginia;

Cherryville, North Carolina;

and Ocala and Plant City, Florida.

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Manufactured housing is a regional business and the primary geographic market for a typical manufacturing facility is within a cost effective shipping radius of 350 miles.

Each of our manufacturing facilities serve multiple distributors and a number of one-time purchasers.

Each of our manufacturing facilities serves multiple distributors and a number of one-time purchasers.

Because homes are produced to fill existing wholesale orders, our factories generally do not carry finished goods inventories, except for homes awaiting delivery.

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Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that costs cannot be efficiently matched to the home sales price.

We continue to monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs.

From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served.

These shortages may result in extended order backlogs, delays in the delivery of homes, and reduced gross margins from home sales.

As described in more detail elsewhere in this Annual Report, impacts from the COVID-19 pandemic have contributed to such disruptions.

Sales order backlogs inc reased to $603 million at April 3, 2021, up $479 million compared to $124 million at March 28, 2020.

Availability of these inputs has not caused significant production halts in the current period, but we have experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies as we have needed to change processes in response to the delay in materials.

These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales.

Housing demand remains strong as qualified individuals continue pursuing affordable home-ownership.

Home order rates have moderated from the extreme highs we saw during the summer of 2020 to the summer of 2021, but still remain above pre-pandemic rates, which we considered to be strong.

The increase in orders outpaced production and raised our home order backlog at April 2, 2022 to approximately $1.1 billion in wholesale sales values, up $511 million from $603 million one year earlier.

The year over year increase includes $264 million attributable to our acquisition of Commodore.

Distributors may cancel orders prior to production without penalty.

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Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders.

It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations.

We continue to focus on developing production growth opportunities by working to improve our production capabilities and processes and adjusting product offerings.

We strive to balance the production levels and workforce size with the demand for our product offerings to maximize efficiencies.

Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face a major challenge in overcoming hiring difficulties in the current environment.

However, we are continually reviewing wage rates of our production employees and have established other monetary incentive and benefit programs to en sure competitive compensation.

We are also working to more extensively use online recruiting tools, update our recruitment brochures, enhance our training programs and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.

Although we continue to experience hiring challenges and other inefficiencies from building material supply disruptions, we have reduced our total open production positions needed by nearly 25% over the past year, bringing our total average plant capacity utilization rate to exceeding 80% during the fourth fiscal quarter of 2022, which is above pre-pandemic levels.

Distribution .

We sold 16,697, 14,214 and 15,100 factory-built homes in fiscal years 2022, 2021 and 2020, respectively, through Company-owned and independent distribution channels.

As of April 3, 2021, there were a total of 40 Company-owned retail stores, located in Oregon, Arizona, New Mexico, Texas, Oklahoma and Florida.

Thirty-two of the Company-owned retail stores are located in Texas.

As of April 2, 2022, there were a total of 45 Company-owned retail stores, located in Oregon, Arizona, Nevada, New Mexico, Texas, Indiana, Oklahoma, Florida and New York.

Thirty-one of the Company-owned retail stores are located in Texas.

Company-owned retail stores are generally located on main roads or highways with high visibility, each having a sales office, which is generally a factory-built structure, and a variety of model homes of various sizes, floor plans, features and prices.

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We internally finance home inventories at Company-owned retail stores.

As of April 3, 2021, we had a network of independent distributors, of which 13% were in Arizona, 9% in Texas, 8% each in California and Florida, 7% in Oregon, 6% in Georgia and 5% each in North Carolina and Washington, based on the quantity of wholesale shipments during fiscal year 2021.

As of April 2, 2022, we had a network of independent distributors, of which 9% were in Arizona, 8% in Texas, 7% each in California, Florida and North Carolina and 6% each in Georgia and Oregon, based on the quantity of wholesale shipments during fiscal year 2022.

The remaining 50% were in 41 other states and Canada.

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We provide the retail home buyer a one-year limited warranty covering defects in material or workmanship in home structure, plumbing and electrical systems.

Nonstructural components of a cosmetic nature are warranted for 120 days, except in specific cases where state laws require longer warranty terms.

Nonstructural components of a cosmetic nature are generally warranted for 120 days from the date of delivery, except in specific cases where state laws require longer warranty terms.

The warranty does not extend to installation and setup of the home, as the distributor is generally responsible for these activities.

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We provide a source of retail home buyer financing on competitive terms through our subsidiary, CountryPlace.

We offer conforming and non-conforming mortgages and home-only loans to purchasers of numerous brands of factory-built homes sold by Company-owned retail stores including certain independent distributors, builders, communities and developers.

We offer conforming and non-conforming mortgages and home-only loans to purchasers of numerous brands of factory-built homes sold by Company-owned retail stores and certain independent distributors, builders, communities and developers.

We are authorized to directly endorse FHA Title I and Title II mortgage insurance, are an approved lender with the VA and the USDA under its Single Family Housing Guaranteed Loan Program, are approved to issue GNMA-insured mortgage-backed securities and are authorized to sell mortgages to, and service mortgages for, Fannie Mae and Freddie Mac.

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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.

Our loan contracts are secured by factory-built homes located in 26 states, with the largest concentrations in Texas, Florida, Arizona, Oklahoma and New Mexico.

See Note 6 to the Consolidated Financial Statements for additional geographic concentration information.

With respect to the impact from the COVID-19 pandemic, we are complying with all state and federal regulations regarding loan forbearance and home foreclosures.

Our loan contracts are secured by factory-built homes located in 26 states, with the largest concentrations in Texas, Florida, New Mexico, Oklahoma and Alabama (see Note 6 to the Consolidated Financial Statements for additional geographic concentration information).

W e continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.

See further details in the "Government Regulation" section below.

We initially increased our loan loss reserves and continue to evaluate the adequacy of these reserves as economic conditions change.

Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner.

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We have expanded our home-only lending programs in recent years, partially with the support of independent third-party financiers.

Home-only loans originated are either sold outright, grouped and sold as a pool of loans, or held for investment.

Home-only loans and non-conforming mortgages originated are either sold outright, grouped and sold as a pool of loans, or held for investment.

Standard Casualty, located in Texas, specializes in homeowner property and casualty insurance products for the manufactured housing industry and holds insurance licenses in multiple states, primarily serving the Texas, Arizona, New Mexico and Nevada markets.

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There are three basic types of consumer financing in the factory-built housing industry:

conforming mortgage loans which comply with the requirements of FHA, VA, USDA or GSE loans;

conforming mortgage loans which comply with the requirements of FHA, VA, USDA or GSEs;

non-conforming mortgages for purchasers of the home and the land on which the home is placed;

and personal property loans (often referred to as home-only or chattel loans) for consumers where the home is the sole collateral for the loan (generally HUD code homes).

Restrictive underwriting guidelines and higher interest rates compared to mortgages for site-built homes, a limited number of institutions lending to manufactured home buyers and limited secondary market availability for non-conforming mortgages and home-only personal property loans secured by manufactured homes continue to constrain industry growth.

We work directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry.

Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.

Limited secondary market availability for non-conforming mortgages and home-only personal property loans secured by manufactured homes continue to constrain industry growth.

We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loans and non-conforming mortgage portfolios and expand lending availability in the industry.

Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities.

We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.

We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders.

We also work with industry trade associations to encourage favorable legislative and GSE action to address the mortgage financing needs of buyers of affordable homes.

We also work independently and with industry trade associations to encourage favorable legislative and GSE action to address the financing needs of buyers of affordable homes.

Federal law requires GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.

In December 2017, Fannie Mae and Freddie Mac released their final Underserved Markets Plans that describe, with specificity, the actions they would take over a three-year period to fulfill the "Duty to Serve" obligation.

These plans became effective on January 1, 2018.

On January 5, 2021, the Federal Housing Finance Agency, the GSE regulator, announced that it had issued "Non-Objections" to modified plans which are extended through 2021.

The plans offered enhanced mortgage loan products for manufactured homes titled a s real property through Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.

In April 2022, Fannie Mae and Freddie Mac released their Underserved Markets Plans for 2022-2024 that describe, with specificity, the actions they would take over the three-year period to fulfill the "Duty to Serve" obligation.

As with prior plans, the 2022-2024 plans offer enhanced mortgage loan products for manufactured homes titled a s real property, including Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.

Although some progress has been made with these programs, meaningful positive im pact in the form of increased home orders has yet to be realized.

Small-scale pilot programs included in the plans for the purchase of home-only loans have not occurred.

Public input into the GSE’s proposed 2022-2024 Underserved Markets Plans is scheduled for summer 2021.

The plans do not include purchases of home-only loans during the three-year timeframe.

Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers.

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Our obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount of contingent obligations under such repurchase agreements was approximately $74.2 million and $79.3 million as of April 3, 2021 and March 28, 2020, respectively.

The maximum amount of contingent obligations under such repurchase agreements was approximately $141.0 million and $74.2 million as of April 2, 2022 and April 3, 2021, respectively.

The increase is the result of higher home sales price, increased units under these programs and the addition of Commodore.

The risk of loss under these agreements is spread over many distributors and is further reduced by the resale value of the homes that we obtain upon the execution of a repurchase.

We continue to make certain commercial loan programs available to members of our wholesale distribution chain.

Under our commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers as well as provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases (see Note 7 to the Consolidated Financial Statements).

Under our commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers (see Note 7 to the Consolidated Financial Statements).

Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.

While these initiatives support our ongoing efforts to expand product distribution, they do expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.

We have included considerations related to the COVID-19 pandemic when assessing the risks of loan loss and setting reserve amounts for the commercial finance portfolio.

While these initiatives support our ongoing efforts to expand product distribution, they also expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.

Industry Overview

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The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing.

According to World Bank, the U.S.

adult population is estimated to expand by approximately 9.1 million between 2022 and 2027.

Young adults born from 1976 to 1995, often referred to as Gen Y or Millennials, represent a large segment of the population who are generally first-time home buyers attracted by the affordability, diversity and location flexibility of factory-built homes.

Young adults born from 1976 to 1995, often referred to as Gen Y or Millennials, represent a large segment of the population who are generally first-time home buyers attracted by the affordability, product diversity and location flexibility of factory-built homes.

The age 55 and older category is reported to be the fastest growing segment of the U.S.

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and Cascade Financial Services.

Certain of these competitors are larger than CountryPlace and have access to substantially more capital and cost efficiencies.

Certain of these competitors are larger than CountryPlace and have access to substantially more capital.

CountryPlace remains competitive in breadth of loan product offerings, interest rates, customer service and loan servicing capabilities.

The market for homeowners' insurance is highly competitive as well.

The market for homeowners' insurance is highly competitive.

Standard Casualty competes principally in property and casualty insurance for owners of manufactured homes with companies such as National Lloyds and American Modern Insurance, which may be larger and offer broader types of insurance allowing them to be more aggressive in their underwriting standards.

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On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Dodd-Frank Reform Act") was signed into law.

The Dodd-Frank Reform Act revises portions of the Dodd-Frank Act, reduces the regulatory burden on smaller financial institutions, including eliminating certain provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the "SAFE Act"), and protects consumer access to credit.

With the elimination of certain provisions of the SAFE Act, manufactured housing distributors can now assist home buyers with securing financing for the purchase of homes;

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Certain CFPB mortgage finance rules required under the Dodd-Frank Act, and modified by the Dodd-Frank Reform Act, apply to consumer credit transactions secured by a dwelling, which include real property mortgages and home-only loans secured by manufactured homes.

These rules defined standards for origination of "Qualified Mortgages," established specific requirements for lenders to prove borrowers' ability to repay loans and outlined the conditions under which Qualified Mortgages are subject to safe harbor limitations on liability to borrowers.

The rules also establish interest rates and other cost parameters for determining which Qualified Mortgages fall under safe harbor protection.

Among other issues, Qualified Mortgages with interest rates and other costs outside the limits are deemed "rebuttable" by borrowers and expose the lender and its assignees (including investors in loans, pools of loans, and instruments secured by loans or loan pools) to possible litigation and penalties.

The CFPB issued a final rule, effective October 1, 2022, which expands the definition of a "General Qualified Mortgage" and gives lenders more leeway to determine a borrower's likelihood of repayment.

Under the original Qualified Mortgage rule, the ratio of the consumer’s total monthly debt to total monthly income could not exceed 43% for a loan to be considered a Qualified Mortgage.

In December 2020, the Bureau issued a "QM Final Rule" which amended Regulation Z by replacing the original, debt ratio-based Qualified Mortgage definition with a limit based on loan pricing, among other changes to the definition.

The original Qualified Mortgage rule also defined a temporary category of Qualified Mortgages, commonly known as the GSE Patch, which includes mortgages that are eligible to be purchased or guaranteed by either of the GSEs while operating under the federal conservatorship.

Under the original Qualified Mortgage rule, the GSE Patch was set to expire on July 1, 2021.

Under the QM Final Rule, the GSE Patch will expire upon the earlier of October 1, 2022, or the date the applicable GSE exits federal conservatorship.

These rules defined standards for origination of a Qualified Mortgage ("QM"), established specific requirements for lenders to prove borrowers' ability to repay loans and outlined the conditions under which QMs are subject to safe harbor limitations on liability to borrowers.

The rules also establish interest rates and other cost parameters for determining which QMs fall under safe harbor protection.

Among other issues, QMs with interest rates and other costs outside the limits are deemed "rebuttable" by borrowers and expose the lender and its assignees (including investors in loans, pools of loans and instruments secured by loans or loan pools) to possible litigation and penalties.

The CFPB issued a final rule, effective June 30, 2021, with mandatory compliance as of October 1, 2022, which expands the definition of a General QM and gives lenders more leeway to determine a borrower's likelihood of repayment.

Under the original QM rule, the ratio of the consumer's total monthly debt to total monthly income could not exceed 43% for a loan to be considered a QM.

In December 2020, the Bureau issued a QM Final Rule which amended Regulation Z by replacing the original debt ratio-based QM definition with a limit based on loan pricing, among other changes to the definition.

The original QM rule also defined a temporary category of QMs, commonly known as the GSE Patch, which includes mortgages that are eligible to be purchased or guaranteed by either of the GSEs while operating under the federal conservatorship.

Under the original QM rule, the GSE Patch was set to expire on July 1, 2021.

However, the CFPB extended the mandatory compliance date of the new General QM rule beyond July 1, 2021.

Nonetheless, some lenders originating loans for sale to the GSEs elected to no longer originate general QM loans with debt-to-income ratios in excess of 43% or GSE Patch QM loans for borrower applications received on or after July 1, 2021.

While many manufactured homes are currently financed with agency-conforming mortgages in which the ability to repay is verified, and interest rates and other costs are within the safe harbor limits established under the CFPB mortgage finance rules, certain loans to finance the purchase of manufactured homes, especially home-only loans and non-conforming mortgages, may fall outside the safe harbor limits.

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Loans with rates or fees in excess of the limits are deemed "High Cost Mortgages" and provide additional protections for borrowers, including with respect to determining the value of the home.

Most loans for the purchase of manufactured homes have been written at rates and fees that would not appear to be considered High Cost Mortgages under the new rule.

Based on our experience, we believe that most loans for the purchase of manufactured homes have been written at rates and fees that would not appear to be considered High Cost Mortgages under the new rule.

Although some lenders may continue to offer loans that are now deemed High Cost Mortgages, the rate and fee limits appear to have deterred some lenders from offering loans to certain borrowers and may continue to make them reluctant to enter into loans subject to the provisions of HOEPA.

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Certain loans secured by manufactured homes, primarily home-only loans, could be considered HPMLs.

Among other things, the rules require creditors to provide copies of appraisal reports to borrowers prior to loan closing.

To implement these amendments, the CFPB adopted the HPML Appraisal Rule, effective December 30, 2014, and loans secured by new manufactured homes were exempt from the rule until July 18, 2015.

While it's not possible to determine the magnitude of these changes, some prospective home buyers may be deterred from completing a manufactured home purchase as a result of appraised values.

Among other things, the rules require creditors to provide copies of appraisal reports to borrowers prior to loan closing, although loans secured solely by a manufactured home and not land are exempt from the HPML appraisal requirement so long as the lender provides the home buyer with alternative information about the home value in one of three allowable forms.

While it's not possible to determine the magnitude of these changes, some prospective home buyers may be deterred from completing a manufactured home purchase as a result of the disclosure of the appraised value.

The Dodd-Frank Act also required integrating disclosures provided by lenders to borrowers under TILA and RESPA.

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Violations of Regulation C, including incomplete, inaccurate or omitted data, are subject to administrative sanctions, including civil money penalties, and compliance can be enforced by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, HUD or the CFPB.

New FHA Title I program guidelines became effective on June 1, 2010 and provide Ginnie Mae the ability to securitize manufactured home FHA Title I loans.

These guidelines were intended to allow lenders to obtain new capital, which can then be used to fund new loans for their customers.

Home-only loans have languished for several years and these changes were meant to broaden home-only financing availability for prospective homeowners.

However, we are aware of only a small number of loans currently being securitized under the Ginnie Mae program.

The Housing and Economic Recovery Act of 2008 requires GSEs to facilitate a secondary market for mortgages on housing for very low, low and moderate-income families in under-served markets, including manufactured housing.

On January 30, 2017, the Federal Housing Finance Agency issued a final rule specifying the scope of GSE activities that are eligible to receive credit for compliance with the "Duty to Serve" rule after January 2018.

In December 2017, Fannie Mae and Freddie Mac each released their final Underserved Markets Plans that describe, with specificity, the actions they would take over a three-year period to fulfill the "Duty to Serve" obligation.

These plans became effective on January 1, 2018.

On January 5, 2021, the Federal Housing Finance Agency, the GSE regulator, announced that it had issued "Non-Objections" to modified plans which are extended through 2021.

The plans offered enhanced mortgage loan products for manufactured homes titled as real property through Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.

Although some progress has been made with these programs, meaningful positive impact in the form of increased home orders has yet to be realized.

Small-scale pilot programs included in the plans for the purchase of home-only loans have not occurred.

Public input into the GSE’s proposed 2022-2024 Underserved Markets Plans is scheduled for summer 2021.

Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers.

FHA Title I program guidelines provide Ginnie Mae the ability to securitize manufactured home FHA Title I loans.

These guidelines are intended to allow lenders to obtain new capital, which can then be used to fund new loans for their customers.

Home-only loans have languished for several years while these changes were meant to broaden home-only financing availability for prospective homeowners.

We are aware of only a small number of loans currently being securitized under the Ginnie Mae program.

On March 27, 2020, the CARES Act was signed into law.

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Forbearance may be extended for an additional 6 months at the borrower's request, and they may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance .

On March 29, 2021, the Centers for Disease Control ("CDC") extended the existing eviction moratorium until June 30, 2021, although the CDC extension is the subject of pending litigation.

The CARES Act prohibits mortgage servicers from charging borrowers a fee for late payments during forbearance and from initiating a foreclosure process, moving for a foreclosure judgment or order of sale, or executing a foreclosure-related eviction or foreclosure sale for any federally backed mortgage loan.

The CARES Act also amends the Fair Credit Reporting Act by providing that, from January 31, 2020 and until 120 days after the COVID-19 national emergency is terminated, mortgage servicers granting payment forbearance are required to report the mortgages in forbearance as paid current unless the mortgages were delinquent before the period of forbearance.

As of the date of this report, the national emergency had not been terminated.

The CARES Act also contains corporate income tax provisions that will be advantageous to the Company, including providing temporary suspension of certain payment requirements for the employer portion of social security taxes and the creation of certain refundable employee retention credits.

In addition to the CARES Act, numerous state and local governments have issued temporary emergency orders recommending or mandating that mortgage servicers accommodate borrowers experiencing hardship due to the COVID-19 pandemic.

The federal foreclosure moratorium expired on July 31, 2021;

however mortgage servicers were precluded from proceeding with foreclosure until January 1, 2022.

Effective August 31, 2021, the CFPB published rules to help homeowners pursue loss mitigation options with mortgage servicers to avoid foreclosure.

These rules allowed mortgage servicers to offer certain streamlined loss mitigation options.

The FHA allowed for an extension of the foreclosure-related eviction moratorium for foreclosed borrowers through September 30, 2021.

When the eviction moratorium for federally backed loans ended, mortgage servicers could only proceed with foreclosures if borrowers had abandoned their properties or had not responded to mortgage servicers' efforts to assist with loss mitigation options.

On February 18, 2022, President Biden extended the national emergency declaration for the COVID-19 pandemic beyond March 1, 2022.

The Treasury Department issued guidance regarding the Homeowner Assistance Fund ("HAF"), which was established under section 3206 of the American Rescue Plan Act of 2021.

The HAF was established to mitigate financial hardships associated with the COVID-19 pandemic by providing funds to eligible state agencies for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services and displacements of homeowners experiencing financial hardship after January 21, 2020, through qualified expenditures related to mortgages and housing.

Eligible state agencies participating in HAF are responsible for the selection and qualification of borrowers to receive HAF funds.

Numerous state and local governments also issued temporary emergency orders recommending or mandating that mortgage servicers accommodate borrowers experiencing hardship due to the COVID-19 pandemic.

These emergency orders include a variety of provisions, including payment forbearance, waiver of late fees on past due payments, restrictions on reporting payment status to credit reporting agencies and moratorium on debt collection activities, foreclosures and evictions.

We have implemented practices and adjusted policies to comply accordingly.

On April 19, 2021, the CFPB issued an interim final rule, effective November 30, 2021, amending Regulation F to require debt collectors to provide written notice to certain consumers of their protections under the CDC's eviction moratorium order of March 29, 2021.

The GSEs require that seller/servicers such as CountryPlace maintain minimum levels of capital and liquidity to be eligible to service single-family mortgage loans guaranteed or owned by the GSEs.

The current eligibility requirements became effective on December 31, 2015.

On January 31, 2020, Federal Housing Finance Agency ("FHFA") initially released its "Servicer Eligibility 2.0" proposed enhancements to the requirements for public input, and on February 24, 2022, FHFA issued a revised proposal for public input.

The proposed requirements establish a minimum level of tangible net worth that distinguishes between Ginnie Mae and Fannie Mae and Freddie Mac loan servicing, and include a fixed base capital requirement as well as an incremental charge that reflects the volume and risk of a seller/servicer's servicing portfolio.

The final eligibility requirements are expected to be in effect as of December 31, 2022.

Although the proposed eligibility requirements are not yet final and may change prior to their effective date, CountryPlace has evaluated the proposal and believes that its capital and liquidity are such that it will continue to satisfy the requirements as currently proposed once in effect.

The interim final rule also prohibits certain communications methods and content and places limits on debt collectors' attempts to communicate with consumers who are obligated to repay debt, attorneys representing them or related parties.

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Underwriting, premiums, investments and capital reserves (including dividend payments to stockholders) are subject to the rules and regulations of these state agencies.

In 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the "Health Reform Law"), was passed into law.

As enacted, the Health Reform Law reforms, among other things, certain aspects of health insurance.

We believe that the health plans we offer are in compliance with the Health Reform Law.

Governmental authorities have the power to enforce compliance with applicable regulations and violations may result in the payment of fines, the entry of injunctions or both.

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The housing industry is generally subject to seasonal fluctuations based on new home buyer purchasing patterns.

Demand for our core new home products typically peaks each spring and summer before declining in the winter, consistent with the overall housing industry, although this pattern has become distorted during the COVID-19 pandemic, as discussed elsewhere in this Annual Report.

Diversification among our product lines and operations has partially offset the extent of any seasonal fluctuations.

Diversification among our product lines and operations has partially offset the impact of any seasonal fluctuations.

Additionally, demand patterns for park model RVs, cabins and homes used primarily for retirement or seasonal living partially offset general housing seasonality.

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However, we are subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of our policies are underwritten.

Where applicable, losses from catastrophic events are somewhat limited by reinsurance contracts in place as part of our loss mitigation structure.

Losses from catastrophic events are limited by reinsurance contracts in place as part of our loss mitigation structure.

Human Capital Resources

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We believe that an engaged, productive workforce is critically important to creating shareholder value.

To that end, we are committed to providing opportunities for professional growth and advancement based on performance, qualification, demonstrated skill and achievement.

During the year, we launched a number of internal programs and campaigns to enhance the culture and capability of our workforce.

Driven by our aspiration to make a difference by focusing on excellence, we are executing on a strategy that is designed to elevate and drive the recruiting, retention and experience of our team members.

One of our initiatives this year included refreshing our Code of Conduct, and then executing a multi-channel bi-lingual compliance training initiative so that our team members will understand our commitment to, and their responsibility for, maintaining high standards of integrity in the workplace.

The program continues to be rolled out through our new learning management system, and each new and existing team member is provided the same training.

Another initiative was providing leadership training to new managers and other employees in supervisory roles to enhance communication and other critical management skills to improve the oversight and motivation of other employees.

Also emblematic of our approach to human resources is how we demonstrated our commitment to our employees by how we responded to the COVID-19 pandemic.

In March of 2020, we created a COVID-19 task force that continues to meet regularly to discuss, among other things, recent infection and related trends and the new CDC recommendations.

The task force determines protocols and procedures to maintain health and safety within our plants and across our operations for the safety of our customers and trade partners.

We adjusted our paid time off and certain other employment-related policies, provided support programs for team members and made changes to our benefits programs and health plans to provide care, testing and vaccinations for our team members.

We have taken steps to maintain a safe working environment, including requiring face masks, providing visual markers, implementing technology solutions, social distancing and placing a high priority on cleaning our facilities for the safety of our team members.

To that end, we are committed to providing a safe workplace and opportunities for professional growth and advancement based on performance, qualification, demonstrated skill and achievement at a fair wage.

As part of our commitment to focus on safety, our Safety Now program builds safety awareness and provides training and incentives to create a "safety first" culture throughout our manufacturing operations.

In addition to improved safety training, especially for our newest associates, elements of this program include encouraging employee suggestions for a safer workplace, enhanced safety signage and reward programs for teams with the lowest safety incident rates and those with the most improved safety records.

We also have a number of internal programs and campaigns to enhance the culture and capability of our workforce.

Driven by our aspiration to make a difference by focusing on excellence, we are executing our SPARK initiative, which is designed to improve the onboarding experience of our team members and drive retention.

Our IGNITION program provides leadership training to new managers and other employees in supervisory roles to enhance communication and other critical management skills to improve the oversight and motivation of other employees.

This training includes increasing technical skills, improving professional skills, expanding technology experience and educating on safety and security protocols, to name a few.

We have a multi-channel bi-lingual compliance training initiative so that our team members will understand our commitment to, and their responsibility for, maintaining high standards of integrity in the workplace.

The program has been rolled out through our learning management system, with each new and existing team member being provided the same training.

We intend to be an employer of choice.

To that end, we consistently assess the current landscape and labor market to refine our total rewards programs.

We also monitor our progress in raising the incomes of our lowest wage earners so they can achieve success for themselves and their families.

In addition, we have started a program called Homes for Our Own.

This program generally involves education and financial assistance for employees aspiring to own their own home.

We strive to help employees understand the home buying process, from getting financially ready to buy and maintain a home to how the actual process works.

More information on the above programs and more can be found in our Corporate Responsibility Report, published on our website.

Available Information

The Company's periodic and current reports, proxy statements, as well as any amendments to such filings, are made available free of charge through our Internet site, www.cavco.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

The Company's periodic and current reports, proxy statements, as well as any amendments to such filings, are made available free of charge through our web site, www.cavco.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business