How KB Home Uses This Clause
KB Home purchase agreements have been documented to include affiliated lender incentive steering provisions. KB Home offers incentives to buyers who finance through its affiliated lender, KBHS Home Loans. The company discloses that it and KBHS share common ownership and may receive a financial benefit from the arrangement. HUD imposed a $3.2 million penalty on KB Home Mortgage Company in 2005 for 13 underwriting violations, including approving loans to ineligible borrowers and basing approvals on overstated income. This clause has been the subject of litigation, including HUD Underwriting Violations.
This provision typically appears within the purchase agreement alongside other terms that may limit buyer remedies. This provision is closely connected to KB Home's affiliated lending arm, KBHS Home Loans (NMLS #1542802). Because KB Home operates across multiple states, the enforceability and practical impact of this clause varies depending on where the home is located.
KB Home's scale means contract templates are largely standardized across its operations. A clause identified in one market's contract is likely present in other markets' contracts, though local addenda may modify the terms.
Builder-Specific Details
Combined with Deposit Forfeiture
Incentives tied to using the preferred lender may be lost if the buyer switches lenders, and the deposit terms may reflect this.
Regional Contract Patterns
KB Home operates in a more focused geographic footprint. Contract terms may vary somewhat between markets, but documented patterns tend to be consistent across the builder's operating states.
Connection to KBHS Home Loans (NMLS #1542802)
KB Home operates KBHS Home Loans (NMLS #1542802) as an affiliated lending arm. The builder may offer financial incentives for buyers who use this lender, which creates a direct connection between the lending relationship and the terms of the purchase agreement.
Legal History
The following cases involve KB Home's use of this clause type.
HUD Underwriting Violations
HUD imposed a $3.2 million administrative penalty on KB Home Mortgage Company, the largest such penalty in HUD's history at the time. The settlement resolved 13 underwriting violations, including approving loans to ineligible borrowers, approving loans based on overstated or incorrect income, failing to include all borrower debts, and falsely certifying that it had personally underwritten mortgages.
State-by-State Enforceability
Enforceability of this clause varies by state. The following reflects KB Home's operating states.
| State | Status | Note |
|---|---|---|
| Texas | Likely Enforceable | Texas generally permits builders to offer incentives conditioned on using a preferred lender,... |
| California | Uncertain | California permits preferred lender arrangements subject to RESPA requirements, but the California... |
| Arizona | Likely Enforceable | Arizona permits builders to offer incentives conditioned on using a preferred lender, subject to... |
| Nevada | Likely Enforceable | Nevada permits builders to offer incentives conditioned on using a preferred lender, subject to... |
| Colorado | Likely Enforceable | Colorado permits builders to offer incentives conditioned on using a preferred lender, subject to... |
| North Carolina | Likely Enforceable | North Carolina permits builders to offer incentives conditioned on using a preferred lender, subject... |
| Florida | Likely Enforceable | Florida permits builders to offer incentives conditioned on using a preferred lender, subject to... |
| Washington | Uncertain | Washington permits preferred lender arrangements subject to RESPA requirements, but the Washington... |
| Idaho | Likely Enforceable | Idaho permits builders to offer incentives conditioned on using a preferred lender, subject to... |
Related Clauses in KB Home Contracts
This clause often works in combination with other provisions in KB Home's purchase agreements.
Incentives tied to using the preferred lender may be lost if the buyer switches lenders, and the deposit terms may reflect this.
What Buyers Can Do
- Compare rates with independent lenders. KBHS Home Loans (NMLS #1542802) may offer closing cost credits or other incentives, but the overall loan terms may not be the most competitive available.
- Calculate the true cost of lender incentives. A closing cost credit of several thousand dollars may be offset by a higher interest rate over the life of the loan. Run the numbers for your specific situation.
- Review the HUD Underwriting Violations case. The HUD Underwriting Violations ruling may be relevant to your situation. If you are buying a KB Home home in a state with similar legal protections, this precedent could affect the enforceability of this clause.
- Have the full contract scanned before signing. This clause is often one of several interconnected provisions in KB Home contracts that collectively limit buyer remedies. A contract scan can identify all of them.