Toll Brothers Inc. (NYSE:TOL) late Wednesday disclosed it is offering a 30-year fixed rate mortgage to qualified buyers at a discounted interest rate of 3.99%. By midday Thursday, company executives said, inquiries about the program were pouring in.
In a brief interview with Big Builder Online, Don Salmon, president and CEO of Toll's mortgage unit, TBI Mortgage Co., Kira McCarron, Toll's VP of marketing, and Fred Cooper, senior VP of finance, said the program would be available for all buyers of Toll homes who qualified.
"This program, thus far, is making the phones ring," said McCarron, adding that it was too soon to report results.
The 3.99% loans, a full percentage point below the best rates available elsewhere, are available for amounts up to the conforming loan limit of $417,000 for buyers who put at least 20% down and have credit scores above 720. The loans will carry no origination points.
In Toll's most recent earnings release, the company said its average price during the fourth quarter of 2008 had fallen to $495,000, well below the average price of net signed contracts of $580,000 in 2008's first quarter.The execs said the decline in average price was due in part to a shift in product mix toward lower priced communities.
The company views the subsidy it will provide to write the mortgages as a sound investment. The company views the mortgage unit, which generates a comparatively small annual profit, as a "service provider to help us sell homes," said Cooper. Added Salmon, "If it helps us sell homes, that creates increased profitability."