Because it expects homebuilding growth to stay strong for the next three to five years, Pulte Homes Inc. is beefing up its mortgage unit, which will now originate loans only for homes its parent builds.
Pulte Mortgage LLC, a subsidiary of the Bloomfield Hills, Mich., homebuilding giant, announced last week that it will open a mortgage origination and processing center in Charlotte. It currently has a processing center at its headquarters in Denver.
The new center, which Pulte Mortgage plans to begin staffing in October, should be operating at full capacity by the end of next year and could increase the unit’s work force of roughly 1,000 by more than 20%, according to Debra Still, Pulte Mortgage’s president and chief executive.
“We’re building the site about a year to a year and a half before I would suggest we really need it,” she said in an interview last week. “But we’d rather build it now than when we’re … doing more volume than we’re doing today.”
Pulte Mortgage’s first-quarter originations rose 24% from a year earlier, to 7,592. The principal value of its first-quarter originations rose 29%, to $1.49 billion.
It attributes much of that growth to an increased capture rate — the percentage of Pulte-built homes, excluding those purchased with cash, that are financed with Pulte mortgages. The capture rate was 89% for the first quarter, compared with 86% a year earlier. By comparison, the capture rate for Centex Corp.’s mortgage unit was 73% in the first quarter, roughly flat from a year earlier, and it increased its parent-related home loan originations by just 4%, to 6,829.
The origination numbers also demonstrate that Pulte Mortgage has become more dependent on its parent for customers. In the first quarter the unit made 95% of its loans to Pulte homebuyers, versus 89% a year earlier.
The increased dependency on Pulte-built homes is a result of the elimination of its retail mortgage business. In February, Pulte Mortgage notified its 60 retail loan originators that it was phasing out the operation, Ms. Still said. The employees were told they could stay on until they found new jobs, and only a handful of them remain with Pulte, she said.
All retail loans should be out of the pipeline by the end of next month, she said.
“If we commit ourselves to Pulte’s growth, then we need to make sure that we’ve always got the appropriate capacity to handle Pulte Homes’ business with style and excellent customer service,” Ms. Still said. “Running two business channels is just more complicated from a focus standpoint.”
However, she also said Pulte would not rule out a return to retail lending if it “was the right business decision.”
The variety of homebuyers that Pulte targets certainly demands a great deal of attention. Ms. Still said that Pulte offers roughly 240 loan programs that range from prime to alternative-A to some levels of subprime.
It cuts down some of its workload by selling all of its servicing rights after the first two to four payments. Pulte also does little refinancing; only 2% of its first-quarter originations were refis, versus 4% a year earlier.
