5. Consumer Loans Receivable

The Company acquired consumer loans receivable during the first quarter of fiscal year 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. Consumer loans receivable held for sale are carried at the lower of cost or market and construction advances are carried at the amount advanced less a valuation allowance. The following table summarizes consumer loans receivable (in thousands):



	March 28, 2015			March 29, 2014
Loans held for investment (acquired on Palm Harbor Acquisition Date)	$	77,670		$	87,596
Loans held for investment (originated after Palm Harbor Acquisition Date)	5,005			1,885
Loans held for sale	11,903			6,741
Construction advances	4,076			2,403
Consumer loans receivable	98,654			98,625
Deferred financing fees and other, net	(496		)	(341		)
Consumer loans receivable, net	$	98,158		$	98,284

As of the date of the Palm Harbor acquisition, 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 date of the Palm Harbor transaction as an amount that cannot be accreted into interest income (the non-accretable difference). The cash flow expected to be collected in excess of the carrying value of the acquired loans 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 revenue.



	March 28, 2015			March 29, 2014
	(in thousands)
Consumer loans receivable held for investment – contractual amount	$	192,523		$	223,388
Purchase discount:
Accretable	(73,202		)	(77,737		)
Non-accretable difference	(41,305		)	(57,672		)
Less consumer loans receivable reclassified as other assets	(346		)	(383		)
Total acquired consumer loans receivable held for investment, net	$	77,670		$	87,596

Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected by CountryPlace. As of the balance sheet date, the Company evaluates whether the present value of expected cash flows, determined using the effective interest rate, has decreased from the value at acquisition and, if so, recognizes an allowance for loan loss. 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 weighted averages of assumptions used in the calculation of expected cash flows to be collected are as follows:



	March 28, 2015		March 29, 2014
Prepayment rate	12.6	%	12.0	%
Default rate	1.7	%	2.4	%

Assuming there were a 1% unfavorable variation from the expected level, for each key assumption, the expected cash flows, as of March 28, 2015, would decrease by approximately $2.4 million and $6.4 million for the expected prepayment rate and expected default rate, respectively.

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



	Year Ended
	March 28, 2015			March 29, 2014
Balance at the beginning of the period	$	77,737		$	91,291
Additions	—			—
Accretion	(11,230		)	(11,973		)
Reclassifications from (to) nonaccretable discount	6,695			(1,581		)
Balance at the end of the period	$	73,202		$	77,737

The consumer loans held for investment have the following characteristics:



	March 28, 2015		March 29, 2014
Weighted average contractual interest rate	9.10	%	9.09	%
Weighted average effective interest rate	9.27	%	9.14	%
Weighted average months to maturity	178		188

The Company's consumer loans receivable balance consists of fixed-rate, fixed-term and 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 Government-Sponsored Enterprises ("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 (such as 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 March 28, 2015, for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):



	Consumer Loans Held for Investment
	Securitized 2005		Securitized 2007		Unsecuritized		Construction Advances		Consumer Loans Held For Sale		Total
Asset Class
Credit Quality Indicator
Chattel loans
0-619	$	937	$	594	$	385	$	—	$	58	$	1,974
620-719	14,907		10,266		3,202		—		—		28,375
720+	16,889		10,845		2,252		—		—		29,986
Other	65		—		349		—		—		414
Subtotal	32,798		21,705		6,188		—		58		60,749
Conforming mortgages
0-619	—		—		167		18		345		530
620-719	—		—		1,505		2,909		6,412		10,826
720+	—		—		10		1,149		2,501		3,660
Other	—		—		—		—		2,587		2,587
Subtotal	—		—		1,682		4,076		11,845		17,603
Non-conforming mortgages
0-619	91		674		1,571		—		—		2,336
620-719	1,467		5,736		3,952		—		—		11,155
720+	1,793		3,717		965		—		—		6,475
Other	—		—		321		—		—		321
Subtotal	3,351		10,127		6,809		—		—		20,287
Other loans
Subtotal	—		—		15		—		—		15
	$	36,149	$	31,832	$	14,694	$	4,076	$	11,903	$	98,654

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. Forty-one percent of the outstanding principal balance of consumer loans receivable portfolio is concentrated in Texas. Other than Texas, no other state had concentrations in excess of 10% of the principal balance of the consumer loan receivable as of March 28, 2015.