The head of KB Home told investors that the builder is ending the joint venture with Nationstar Mortgage LLC due to the level of service.
Last month, Los Angeles-based KB Home disclosed that it was winding down its joint venture with Nationstar, Home Community Mortgage.
The assets and operations of the partnership, which was established with Nationstar in 2013, are being transferred to Stearns Lending LLC.
KB reported in its third-quarter 10Q filing with the Securities and Exchange Commission that
it sold 3,083 loans for $796 million to Nationstar in the nine months ended Aug. 31.
In its third-quarter earnings call
on Sept. 20, KB Home Chairman, President and Chief Executive Officer Jeffrey T. Mezger talked about why the company is abandoning the joint venture.
“We made the decision to change cause we weren’t getting it done in the current JV,” he said.
Mezger explained that while Nationstar is a good company,
their primary business is servicing. The joint venture was a new business for them.
“We weren’t able to get the service levels up to a level that generated a high enough capture rate or generated profits and took care of our customers,” he said. “So all the way around … we weren’t getting the service standards that you need to run a mortgage company the right way.”
But Mezger said that Stearns “is wired as an originator; that’s all they do.”
Stearns Lending, however, reported as part of
the Mortgage Daily Second Quarter 2016 Mortgage Origination Survey that it serviced 113,715 loans for $23.857 billion as of June 30.
Another factor that influenced KB Homes’ decision was that Stearns Lending is based in California and is more familiar with the jumbo products in the state.
In addition, according to Mezger, Stearns Lending’s origination platform is far more efficient than Nationstar’s.
“Ideally, we’ll see
increased service levels, better loan products and better execution in turn over time, hopefully a higher capture rate,” he stated.
