Over the past 18 months, KB Home experienced a “great deal of disruption” as Bank of America (BofA) and MetLife curtained their lending mortgage activities, according to the builder’s president and chief executive.
“While it’s difficult to quantify the full impact of the disruptions, there is no question it affected our business significantly,” said CEO Jeffrey Mezger.
He made his remarks during a conference call on the company’s earnings for the second quarter, which ended May 31.
During those 18 months, BofA pulled out of a joint venture with KB Home and in January MetLife announced it was getting out of the residential mortgage lending business.
“While in wind-down mode, neither lender had strong motivation to originate mortgages” and they tightened their underwriting standards, Mezger said during the June 29 conference call. “Loan approvals were delayed or lost on the front end and closings were delayed or cancelled at the backend,” the CEO said.
In March, KB Home entered into a relationship with Nationstar Mortgage, Lewisville, Texas.
As the builder’s “preferred mortgage lender,” Nationstar began taking mortgage applications for KB Home customers on May 1.
Mezger told the analysts and investors that the alliance with Nationstar is progressing very well. “This should enable us to achieve improved sales, fewer cancellations, greater predictability of deliveries, better mortgage customer service and ultimately increased profitability,” he said.
Based in Los Angeles, KB Home sold 1,290 homes in the second quarter, up 2% from a year ago.