Unions Back Home Buyers’ Right to Pick Mortgage Co.

by Mike Hall, Nov 21, 2008

Ross Hyman, a research analyst for the AFL-CIO Center for Strategic Research, brings us this on a new rule that will stop Pulte Homes and other home builders from penalizing buyers who choose their own mortgage company over the builder’s.

Last year, the Charlotte News & Observer reported that when Chad and Mischa Locklear went shopping for a new home in Apex, N.C., Pulte Homes offered to knock $5,000 off the price of the lot for a $375,000 house. But they were told that to qualify for the discount, they would have to use Pulte Mortgage for their home loan. The 100-percent financing arrangement came with a $2,800 monthly payment. According to the paper:

The couple said that when they told Pulte they wanted to put 10 percent down and finance the remainder with a Bank of America loan—with a $2,200 monthly payment—the incentive was withdrawn. “Now if you’re not willing to go through their mortgage companies, they’re really sticking it to you,” Mischa Locklear said.

The Locklears are not alone. For years, consumers have complained to the U.S. Department of Housing and Urban Development (HUD) of being lured to the builders’ mortgage affiliate by advertised incentives and discounts that had been built into the sales price of the home.

Home buyers who chose an unaffiliated mortgage provider were penalized with a higher home price when the home builders withdrew the “discounts” and “incentives.”

In many instances, buyers who took their loans from the home builder’s mortgage affiliate were burdened with higher interest rates and adjustable rate mortgages that left many homeowners unable to make mortgage payments, contributing to the current foreclosure crisis.

In a move supported by unions and consumer groups, but opposed by Pulte Homes and other home builders, HUD has just enacted a rule change to the Real Estate Settlement and Procedures Act that makes this activity illegal. Beginning Jan. 16, home discounts cannot be taken away when home buyers use a mortgage company of their choice.

It is not surprising that Pulte Homes opposed HUD’s rule change. More than nine out of 10 borrowers who buy from Pulte Homes finance through Pulte Mortgage. Pulte has penalized buyers for using different mortgage providers that might have offered lower rates or more traditional mortgages by withdrawing incentives such as a $25,000 closing cost credit.

Workers and homeowners have joined together with the Painters and Allied Trades (IUPAT) and Sheet Metal Workers (SMWIA) to form Building Justice to improve working conditions and house quality in the home-building industry. The website Poorly Built by Pulte Homes is part of this effort and contains information for home buyers on Pulte and Del Webb home construction defects.

Print This Article | E-Mail This Article |Comments (0)