Several months ago, Bank of America notified KB Home that it wanted to end their joint venture in the mortgage industry, which does business as KBA Mortgage, but it was willing to continue the relationship in an alternative fashion.
Instead KB Home made MetLife Home Loans its preferred mortgage lender, effective June 27. KBA Mortgage stopped accepting new loan applications as of June 26, although it will continue to process and close any applications it received.
KB Home revealed the change in its second fiscal quarter results release. It posted a $69 million loss for the period which ended on May 31, compared with a loss of $31 million one year prior. The current period loss includes $36 million in charges, including $15 million on a loan guaranty for its South Edge LLC residential development joint venture. The South Edge venture currently is in bankruptcy.
A statement from Bank of America said, "Bank of America Home Loans informed KB Home in March that it would exit its joint venture mortgage relationship due to regulatory concerns. Since that time, Bank of America has worked closely with KB Home to explore alternative relationships.
"During those discussions Bank of America learned of KB Home's decision to pursue a new alliance with another mortgage lender. We regret that decision but will work to ensure a smooth transition for customers with loans in process with Bank of America’s current JV company."
Other joint ventures are also being wound down, but many of those partners are apparently maintaining their relationship with B of A through marketing services agreements.
In a conference call, Jeffrey Mezger, president and chief executive of KB Home, said the marketing services agreement with MetLife allows his company to focus on its homebuilding operations.
A number of companies, including MetLife, have expressed an interest in forming a new mortgage joint venture with KB Home and the company is exploring its options, he said.
KB Home's equity interest in the B of A joint venture is included in the results under financial services operations, which had pretax income of $1.6 million versus pretax income of $4.2 million one year prior.
The equity in income of the unconsolidated mortgage JV declined to $0.7 million in the quarter, down from $3.6 million one year prior, due to decreases in mortgage loan originations and profits per loan, the company's results release said.
