KB Homes Betting On Countrywide Just As Market Kills It

On KB Homes recent fiscal Q4 2007 earnings call, CEO Jeffrey Mezger presented a straightforward outlook on the housing market--mostly gloomy. Mezger, however, also spent time telling analysts what KB Home was doing during this downturn in order to stabilize the company and survive this difficult period.

Mezger said the company was focused on deleveraging and raising cash to keep things afloat. KB is also refocusing on its traditional core market - first time buyers- by scaling down home models. Mezger seemed to emphasize that steadying the boat was of utmost importance. No more risk taking.

Which is why the following quote is remarkable:

Jeffrey T. Mezger, CEO KB Home

We have capitalized on our unique strategic partnership with Countrywide to provide attractive mortgage programs for our buyers while minimizing our exposure to defaults. In the fourth quarter, 79% of our closings were processed through our joint venture. Of these JV closings, 90% were conforming or government loans, compared to 33% one year ago, and 81% of the borrowers chose a fixed rate mortgage.

Does Mezger know something about Countrywide Financial that the market doesn't? If not, it seems like a big risk to focus on an exclusive relationship with Countrywide at a time when the market seems convinced it is going to go under. Countrywide has lost more than a third of its market value over the last two days on concerns that it would declare bankruptcy.

That's putting alot of eggs in one very fragile basket.

Comments

[H2O:]

They declaired war on the american people with more lying propoganda .......

Wake-up America - the corpo's will keep there lies - propoganda - for there new-world-order ....

The Clinton God-Like world order ....

some must die so they can live !!!
........

2008 Jan 09 04:47 PM

[H2O:]

Well billy-boy said - They would do trench-war-fare on the American People !!!

First the email-lie - then billy-boy himself out lying about obama .....

and those lie's were not countered by the media - until well late in the game ....

but thats typical rovey-tactics - blame the media all the while telling lie's....

simple example: those damn media people won't give hillary a break - but if they only looked at her record - they will find she was being worshipped on the moutian all the time they were voting for the war - she never supported the war - but all those damn media reporters never saw that - they just fall for the planted question that made ole hill cry - see - the media don't report she's a GOD - she cries for her people ....

You see billy-boy tols a lie right infront of everybody and instead of catching the lie - they told the story about how well he love's his wife angry for her - but no referance to the lie !!!!

Then to get the women back - they lied about obama - and his abortion record - spam email everywhere.

So in this trench war-fare - the lie's must be caught - and the so-called - against the status-quo media billy-boy - can lie galore - the bought media will push his lying - all the while saying it's just anger for his wife - and ole-hill can keep letting her tears fly ...

STOP THE LIE'S FASTER .......

2008 Jan 09 04:47 PM

[andthenther...:]

This article makes no sense. The reason KB has a JV with countrywide is to split the profits, meager as they may be now, from those loans funneled through the JV. It does KB no damage, besides these idiotic articles, to have a JV with Countrywide. The loans aren't on KB's books - they do have an internal mortgage operation. If anything, KB has made money on the number of loans it has funneled through the CW-KB JV.

2008 Jan 09 05:17 PM

[william L. ...:]

I wonder how much Countrywide gave to lobby New Jersey Politicians to relax the rules to do business in New Jersey..How much did they spend on this KB ??? better yet I would like to know where the money came from..maybe that 52 billion plus or minus from the bank in Atlanta that is backed by the feds...For the past six months I have been telling people to forget about the sub prime stuff..It will be the pay option arms that will do in the market...The gotcha mortgage....or swindle mortgage as I call it now...I am sure it is the favorite of Mozilo, Countrywide, their brokers and agents !!!!.these people that pushed these mortgages are bad people and they should be the ones to reach into their pockets and return the money that they tricked the honest hard working people out of....Its time to let Countrywide GOOOOOOOOOO under, its the only way to clear the decks..through good money after bad, or i sould say evil...hell no.....someone once said " all that is necessary for the triumph of evil is for good men to do nothing "there are no good men conducting business with Countrywide,Mozilo or their agents and or brokers..

2008 Jan 09 06:47 PM

[Barry Robbins:]

I have been shorting the financials (SKF) and real estate (SRS). But at the end of day Tuesday, after CFC sold off almost 30% in one day, I decided to make a buy. The selling just seemed to be frantic. And as they say, that is the best time to buy. So I picked up CFC at 5.46. I am already down, but I am going to hold a few days and see what happens. I have a feeling CFC is going to bounce back a bit.

2008 Jan 09 08:07 PM

[eponymousLTC:]

when he said 'capitalizing' on their partnership, i think what he meant was that it was actually paying off a little bit by what little dribbles of sales CFC could get out to them. As far as 'eggs in a basket' go, I'd say they're both 'up the creek' instead. :)

2008 Jan 09 08:26 PM

[outtheresom...:]

The reason for the JV between the two is this.
KB Homes at one time had their own mortgage division. KB homes got caught with a larger than average amount of loan defaults. In 2005, the Feds forced KB to closed and sell their mortgage division. Who bought the mortgage division you might ask. Countrywide did.
In 2005 no one cared this was like page 10 news.

2008 Jan 10 12:30 PM