A year ago the future looked somewhat bleak for mortgage banking firms that were the property of homebuilders: new housing starts continued to crumble and their originations were in the tank, big time. But that was 12 months ago. And although no one anticipates homebuilders such as NVR, Pulte Homes and Ryland Homes are poised for a significant boom anytime soon, it appears their mortgage banking divisions have turned the corner.
According to origination figures compiled by National Mortgage News, and the Quarterly Data Report, four out of the five homebuilder-owned mortgage lenders that rank among the top 60 (nationwide) showed a sizeable increase in originations during the second quarter.
The gains come at a time when most top funders saw loan volumes decline in the second quarter, compared to the same period a year ago.
In the second quarter, the nation’s largest homebuilder-owned lender, DHI Mortgage of Austin, Texas, originated $1.38 billion in one-to-four family loans, a 54% jump from last year.
D.R. Horton, its parent, is based in Fort Worth, Texas, a state that boasts one of the strongest housing markets in the nation.
NVR Mortgage saw its second-quarter fundings spike by 45% while Pulte Mortgage fared even better, growing originations by 65%.
Only one lender among this group of five, K&B Mortgage of Woodland Hills, Calif., experienced a decline.
In the second quarter of last year all of these lenders were experiencing double-digit percentage declines in originations while the rest of the home lending industry was booming by feasting on refis.
Executives at these companies declined to talk about their numbers or return telephone calls. All are subsidiaries of publicly traded builders.
But although the firms themselves wouldn’t comment, warehouse consultants and mortgage banking analysts that work with these companies confirmed that conditions are improving.
Michelle Perrin, who brokers warehouse lines, said she recently began negotiating a new line of credit for a privately held mortgage banker owned by a builder. She couldn’t name the firm, citing client confidentiality, but said this company has five warehouse providers willing to extend the company a new credit line.
“It’s a nonpublic firm, and they have $21 million of capital on their books,” Perrin said.
“This thing could even turn into a bidding war.”
Few mortgage bankers that are owned by builders service the mortgages they originate, opting instead to sell their loan production “servicing-released” into the secondary market.
Over the past year servicing-released premiums have increased nicely, adding to the profitability of these companies.
One investment banker who has worked with builder-owned lenders said he recently analyzed the books of a Pennsylvania-based funder and liked what he saw.
He declined to name the firm, but described the lender as “very profitable,” despite lower production compared to a few years back.
These analysts and investment bankers anticipate that when, and if, homebuilding picks up a real head of steam, lending subsidiaries could benefit greatly along with the parent company.
