Debra Still is CEO of the mortgage-lending arm of PulteGroup, the nation’s largest homebuilder. Pulte Mortgage provides new-home financing for PulteGroup’s four home- and community-construction subsidiaries, Pulte Homes, Centex, Del Webb, and DiVosta. Pulte Mortgage has provided lending services to more than 400,000 customers since 1972.
In addition to leading Pulte Mortgage, Debra served as chairman of the Mortgage Bankers Association (MBA) from 2012-13 and is currently the chairman of MBA’s Opens Doors Foundation and the MBA Diversity and Inclusion Committee. She has testified before the House Financial Services committee and the Senate Banking committee a total of four times on RESPA Reform, the Ability to Repay Rule and the definition of QM, and on the Menendez/Boxer Refinance Bill.
PulteGroup and its subsidiaries, Pulte Homes, Centex, and Del Webb, operate in 50 markets across the nation. What are you seeing in terms of regional trends for the economic recovery?
U.S. housing demand continues to recover, benefiting from favorable market factors including an improving job market, relatively low interest rates, low levels of house inventory and a supportive pricing environment. Broadly speaking, positive-demand conditions exist across the country, although housing forever remains a very localized business, so individual markets can show different degrees of strength or weakness. With improving economic conditions and new homes sales running well below historical levels, the potential clearly exists for the recovery to continue going forward.
PulteGroup’s brands target consumers across the homeownership lifespan from starter homes to larger homes with custom amenities to retirement homes and communities. Among those segments, where do you see the most promising signs for growth in the near future?
PulteGroup maintains the broadest product offering and a unique brand strategy as we serve entry-level buyers with our Centex brand, move-up buyers under Pulte Homes, and active adults through our Del Webb communities. The housing recovery to date has been driven by move-up and active-adult buyers who have the financial capacity and access to capital needed to purchase a home in today’s environment. At less than 30 percent of current demand, entry-level consumers remain underrepresented in the market but are a tremendous potential source of future demand as employment strengthens and mortgage credit availability expands.
A recent study by the Federal Reserve Bank of Chicago found that mortgages issued by homebuilder-affiliated lenders from 2001-2008 outperformed loans from other lenders, even though some of the borrowers were relatively higher risk (i.e. with lower credit scores and/or higher DTI ratios). If that tracks with your experience, can you offer some insights into why that’s the case?
I was very pleased to see these findings confirming that homebuilder-affiliated lenders offered consumers the broadest access to credit and yet achieved significantly higher loan performance. I agree with the study’s reasoning that affiliates build a rich relationship with borrowers during the construction of the home and offer more financial and home ownership education. The quality of the collateral and the lower cost to maintain a new home may also contribute to this positive outcome. In addition, I would suggest that one of the advantages of being a builder-owned mortgage company is that there is a very keen focus on the consumer, beginning at the point of sale. In tandem with the builder, we take a long-term view to develop sustainable communities where consumers thrive in their homes. We do not view mortgage financing as a short-term transaction. At Pulte, our aspiration is to build lifetime relationships with our homeowners in the hope that they will buy their first home and every subsequent home from PulteGroup. Our company’s vision is to build customer-inspired homes to make lives better. For Pulte Mortgage, “making lives better” means a commitment to responsible lending, access to credit for all qualified borrowers, and a genuine duty-of-care to consumers.
Is Pulte Mortgage looking at relaxing score cut-offs among some buyer segments or regions?
Pulte Mortgage sells directly to Fannie Mae and Freddie Mac and is an approved Ginnie Mae issuer. Throughout the housing crisis, other than following agency or secondary market investor guidelines, Pulte Mortgage has not imposed additional credit score cut-offs for either certain buyer segments or geographies. Credit scoring has contributed to consistency in underwriting and is a valuable criterion, along with other measures, in evaluating credit risk. But, in my opinion, the industry has become over-reliant on this single factor of credit-risk analysis. With credit still overly tight, it is time we analyze outdated credit scoring models and their impact on credit-risk evaluation. We must update the existing models and add new methodologies to reflect the current environment and provide all qualified consumers the opportunity for homeownership.
What do you see as the biggest challenges facing mortgage lenders over the next 12 to 18 months?
The most immediate challenge is the implications of a very complex RESPA/TILA regulatory change required to be implemented by August 2015. The changes, while good for consumers, are extremely complicated and will take the lion’s share of the next year to build and test, taxing both lenders and technology vendors alike. There are vendors who are abandoning some of their loan origination platforms and document libraries due to the complexity and amount of change. In recent years, technology teams have committed the lion’s share of development capacity to the vast number of required regulatory changes. As a result, businesses are delaying critical innovations to improve the transparency, convenience and efficiency of the loan manufacturing processes. These innovations are necessary to better serve both the consumer and the industry.