Mortgage

Here’s clear evidence of how much more complicated mortgage lending is now

An inside look at one lender's operations

At any gathering of housing industry professionals, it isn’t long before the conversation inevitably turns to the current regulatory environment and how different things are now than they were before the crisis.

That was definitely the case at Wednesday’s "Data, Demand, and Demographics: A Symposium on Housing Finance" presented by the Urban Institute and CoreLogic, where several of the invited speakers touched on the prevalence and effectiveness (or lack thereof) of current regulations.

Some of the chatter among the other attendees of the summit focused on regulations as well, especially after the presentation given by Debra Still, the president and CEO of Pulte Mortgage.

Still spoke during an early afternoon panel, which focused on the post-crisis evolution of the mortgage market, and surprised some in the crowd by presenting concrete evidence of how much more complicated mortgage lending is now than it was 10 years ago.

Most notable among those changes is how much more it costs Pulte Mortgage to originate a mortgage now than it did in 2006.

According to Still’s presentation, it cost Pulte Mortgage $3,100 to originate a mortgage in 2006. By 2012, Pulte’s cost rose to $5,700 per loan, and this year it’s even higher.

Still said that in 2016, it cost Pulte $6,100 to originate a loan, just shy of twice as much as it did 10 years ago.

Pulte’s legal and compliance costs have also risen sharply since 2006.

Ten years ago, Pulte’s legal and compliance outlay checked in at $2 million. That figure increased to $3.5 million in 2012, and this year, Pulte expects its legal and compliance expenses to hit $4 million – double the cost of 2006.

Pulte’s closings per employee are also down from 2006.

In 2006, Pulte’s closings per employee was 39, while this year it’s 19, a decrease of 51%.

For underwriting employees, the drop is even more significant.

According to Still, Pulte’s closings per underwriting employee was 1,299 in 2006, compared to 253 in 2016, a drop of 81%.

For reference, Pulte closed 32,100 loans in 2006 and expects to close approximately 13,000 loans in 2016, according to Still’s presentation.

Another stark indicator of how different lending is now than it was 10 years ago is the average size of loan file at Pulte.

Still said that in 2006, the average loan file checked in at 302 pages. Now, the average loan file is 806 pages, an increase of 167%.

Still also provided some additional insight into how different the lending environment is now than it was in 2006, in the form of a breakdown of loan types.

In 2006, Pulte’s mortgage production broke down this way: 49% of Pulte’s mortgages were non-agency loans, 47% were conventional loans (sold to one of the government-sponsored enterprises), 2% were Federal Housing Administration loans, and 2% were Department of Veterans Affairs.

Contrast that with this year, when 70% of Pulte’s loans are conventional, 12% are VA loans, 11% are FHA loans, and just 7% are non-agency. 

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