Builder joint ventures: several lenders are hot on the trend of setting up joint ventures with home builders. Big-name national lenders as well as more moderate-sized lenders are making these ventures work. They are also being used to target emerging-markets business.

LAST YEAR SAW DEMAND FOR NEW homes continue to soar. Mortgage lenders today are fully realizing what a boon partnerships with home builders can be to their business. Joining forces with home builders has become a popular way to obtain quality purchase-origination business, and lenders are hooking

Most of the top lenders in the country now have affiliations with multiple home builders. And smaller and medium-sized lenders are looking at teaming with builders as one way of replacing the record volumes seen over the past few years.

Partnerships with home builders typically guarantee a higher percentage of customer business than similar arrangements with Realtors, those interviewed for this article say. Realtor joint ventures (JVs) typically show capture rates of 20 percent to 25 percent; builder joint ventures often yield capture rates of 60 percent to 70 percent or even higher, executives say.

That's because individual real estate agents operate as independent contractors, and many already have established relationships with a lender. "Individual real estate agents largely drive the decision as to whom they may refer a loan," says John Stewart, managing director of strategic business development for Countrywide Home Loans Inc., Calabasas, California. "If you do a JV with a real estate company that has 100 real estate agents, you would in essence need to convince 100 individuals of the value of the joint venture. With the home builder, you don't have that same hurdle," Stewart says.

"On the builder side, it's typically more of a captured book of business," agrees Dave Robinson, senior vice president with SunTrust Mortgage Inc., Richmond, Virginia. "A big part of it is real estate agents may already have established relationships," Robinson adds.

The trend to partner with home builders will accelerate going forward, in part because those ventures meet the consumer desire for one-stop shopping when purchasing a home, executives interviewed say. "We will definitely be seeing more affiliated business arrangements with builders in the future," says Desmond Smith, senior vice president for business development with Chase Home Finance, Edison, New Jersey.

In addition to providing homebuyers one-stop shopping, affiliated arrangements also give home builders more control over their business, Smith adds. "When someone walks into a builder center and is a qualified buyer, the builder wants to get them approved and lock them in as soon as possible. The builder has control if they have a marketing agreement or joint venture with a lender. They know that the customer is qualified, so they can feel comfortable building that house," Smith says.