American Homestar Sells Its Interest in 21st Century Mortgage and Forms a New Financing Joint Venture - Homestar 21, LLC.

Business Editors

HOUSTON--(BUSINESS WIRE)--July 10, 2000

American Homestar Corporation (Nasdaq/NM:HSTR) today announced the sale of its 50% ownership interest in its financing affiliate - 21st Century Mortgage - and the formation of a new retail financing joint venture with 21st Century Mortgage. The new venture, Homestar 21, LLC, is 50%-owned by American Homestar and 50%-owned by 21st Century Mortgage and will originate loans for customers of American Homestar as well as for American Homestar's retail franchisees and exclusive dealers. American Homestar will continue its strategic alliances with the leading industry retail lenders who will continue to provide a major portion of its financing for its homebuyers.

While specific terms of the sale and formation of the new venture were not disclosed, it was reported that the sale was for cash in an amount which closely approximated the carrying value of American Homestar's investment in 21st Century; therefore, no significant gain or loss will result. It was also reported that approximately half of the sale proceeds were concurrently reinvested to capitalize the new joint venture and to support a special short-term credit facility.

Commenting further, Chief Executive Officer Laurence Dawson, Jr., said, "We believe these transactions are very positive for all parties involved. As part of the transaction, Clayton Homes, which formerly owned 25% of 21st Century, has increased its ownership to 50% and has extended its contractual funding commitment for another five years. 21st Century management, which formerly owned 25%, also has increased their ownership to 50%, reflecting their commitment to the long-term success of 21st Century and their confidence in a continuing partnership with Clayton.

"American Homestar was able to monetize roughly one-half of its investment in 21st Century and preserve a long-term and reliable homebuyer financing source through Homestar 21, LLC. This enhances our competitive posture through a broader array of homebuyer financing sources and allows us to participate, as before, in the earnings annuity which flows from a well-managed finance company."

American Homestar is one of the leading vertically integrated manufactured housing companies. The Company currently operates 12 manufacturing plants, 111 Company-owned retail sales centers, 11 joint venture retail sales centers and serves 76 retail franchisees and over 300 independent retail locations in 28 states. The Company also provides homebuyer financing through its new finance affiliate, Homestar 21, LLC and provides insurance and transportation services to its customers.

This press release may contain certain forward-looking statements and information based on the beliefs of the Company's management as well as assumptions made by, and information currently available to, the Company's management. Words like "anticipate," "believe," "estimate," "should," "expect," and similar expressions used in this press release are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties, and assumptions, including the risk factors described in the Company's most recently filed registration statement and Form 10-K. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual events or results may vary from those described herein as anticipated, expected, believed, or estimated.

For more information about the Company, visit its Website at www.americanhomestar.com.