Mortgage Industry News

Ruth Lee

Reference:

HUD is asking a lot of questions about ‘required use’

Kenneth R. Harney

Washington Post

Ten years ago, I worked on coordinating consumer testimony to the Texas state legislature on this exact topic.   While our consumers provided hours of testimony and tales of woe, steering and strong arm tactics to the committee… the attorneys for some of the largest builders in the country strolled in and greeted the legislators by name – flashing college rings and golf-tanned faces.  Needless to say, as one of the largest lobbying and GR power centers in the country, the consumers were marginalized and then ignored.

While I believe that there are good builders that aim to effect a smooth purchase transaction for their clients – the assertion that there wasn’t a profit motive for builder originations is just outrageously untrue.  That is like saying that McDonalds starting selling their lucrative coffee products because they just wanted more alert patrons.

Builders have gotten a bad name in mortgage banking for the same reason that everyone else has…because they pushed homes people couldn’t afford with bad mortgage products and strong-armed clients into loans that they could have shopped – if it meant that the builder wouldn’t rescind the offer to pay for concessions – or title insurance premiums – or upgrades.    When faced with the option of losing $30K or more… well, you suck up the slightly less favorable interest rate or higher origination charges.  I have even personally worked with builders that will refuse to sell the home – unless it is originated and closed per their specific directive with their “affiliates.”

From a call with Pulte in 2007 on earnings:

• The second quarter pre-tax income from Pulte’s Financial Services operations was approximately $7 million, or a decrease compared with the prior-year quarter of approximately $8 million. The decrease during the second quarter is mainly attributed to lower revenues from decreased volumes offsetting a favorable product mix shift to higher profit loans and an increase in the capture rate.
• The level of adjustable rate mortgage products originated during the second quarter of 2007 decreased from approximately 33% of origination dollars funded from a warehouse line in the second quarter of the previous year to approximately 9% this quarter. Pulte Mortgage’s capture rate for the current quarter was approximately 93%.