Read this in this morning's New York Times.
Is this old news? Has this practice been reported before? I am long PHM. You may check my previous posts.
Anyone have any insight into this practice? Do all the HBs do this? Looks like a scam....and obviously one has to be aware that it is the NYT reporting. Can't believe there isn't more to this story that they aren't reporting.
If I were to guess, it is that PHM offers a better deal on a mortgage financed through them in exchange for some more stringent requirements being met by borrowers. Maybe the borrowers are naive? Maybe PHM is exploiting unsophisticated borrowers? Shades of the '02-'08 mortgage debacle. This can't be helpful.
It will be interesting if this affects the price tomorrow. Perhaps we can get a washout bottom....sigh, again....and get another opportunity to buy some cheap shares....Or do we see a flush out to new 52 wk lows and further declines to the $5 or less range. Hmmmmmmmm.
For me, it is a positive news because it seems that PHM learned her lession and her mortage finacial unit will only provide the loan to the highest credit customers not those who will default the loan once the house value dips below the mortage value.
If you read the actual article, the story becomes a little clearer. A recently-divorced woman with 3 young kids - but also now remarried with two additional children (5 total) - bought a house with child support as her only income.
So what does the Pulte salesperson do? With a lure of $4,000 to be saved in closing costs, steals her away from another bank who's preapproved her. Pulte takes her deposit before she has a finalized mortgage loan, and then when she doesn't pass muster, they keep her deposit. Sounds pretty unfair to me, and buying from this builder pretty risky.
Moral of the story: don't steal sub-prime business from a competitor (let THEM take the rish); don't take a deposit on a home - nor allow a customer to sign for that home - until a mortgage has been cleared and signed.
I think they mentioned in the CC that this would be their new policy with sign ups.
Odd post for a "long" position. You must have moved to a short position?? Your post is very negative. Do you think that people give 100% true facts at the initial sale? Most exagerate their income and credit. It is only after the banks do their research that the true credit worthiness becomes clear. It would make sense, however, for builders to refund all but the actual costs for any processing.
Very strong buy!!
No...you would be wrong. I am long shares that I bought before Xmas in the $7.50 down to arounf $6.40 area. I held on and didn't sell when it got up past $8.50 or so.
I am concerned that this report will open up some sort of "investigation".
On one hand I can't see where the gov't would gain anything by squeezing the homebuilders, but just like they jumped all over BP for the gulf oil spill, I could see the Obama adm. trying to distract everyone from their other failures by trying to blame the business community (in this case HBs and in particular PHM)for a failure for the HB biz rebound. "See! They could build houses for people, but they'd rather screw them out of their deposits and sit on their cash!"
Please do not assign motivations to anyone without more information.
I'm long. I'm concerned. I have profits in PHM, though 2/3 of 'em have evaporated in the past 3 weeks. I don't want to lose all of 'em.
The average Credit score for Q4 was 754. Think about that. THAT was the average. Unbelievably high - the jerks at Fannie and Freddie who would give a loan to anyone who breathed 3 years ago will only give one to economic saints today. If Pulte wants to have a start up market for young families, they better learn how to do something beside screw prospective first-time home buyers.
May be these banks and home builders feel they've been badly screwed by home buyers in the latest housing boom and bust and they're now trying to get some of their money and get some revenge one way or the other. They're also having anxiety lending money to any one due to their severe past losses. You know like if you have a bad accident and you would get turned off driving on the highway again for a long time.