Pulte cannot omit mortgage risk proposal - report

WASHINGTON, March 7 (Reuters) - Pulte Homes Inc (PHM.N) has been denied a request to exclude a shareholder proposal seeking to establish a way to enforce "prudent lending practices" at the No. 3 U.S. home builder, advisory firm RiskMetrics Group said on Friday.

RiskMetrics said in a report that the denial bucks a trend of the U.S. Securities and Exchange Commission allowing companies to omit similar resolutions from their annual proxy statements.

The report said the SEC "to date has allowed home builders and financial services companies to omit a variety of proposals seeking to address risks related to mortgage lending practices or exposure to mortgage-backed securities."

An SEC spokesman said the agency did not have a comment beyond its staff letter saying it could not concur with Pulte's argument on why it should be allowed to exclude the proposal.

The U.S. housing market has been in a tailspin for more than two years, with top builders cutting prices while orders have dwindled. The industry has also been caught in the spreading subprime mortgage crisis, with has increased investor scrutiny on investment banks and mortgage lenders.

The International Brotherhood of Electrical Workers' Pension Benefit Fund submitted the proposal to Pulte Homes. Itasked the company to establish a committee of outside directors to develop and enforce policies to ensure non-traditional mortgage loans "are consistent with prudent lending practices."

The IBEW also asked that the board report to shareholders within one year on those policies and enforcement.

The proposal was submitted to be included in Pulte's annual proxy materials and to be voted on at the company's annual shareholder meeting.

A representative from the IBEW was not immediately available to comment. A spokesman for Pulte did not immediately return a call seeking comment.

RiskMetrics' report said Pulte Homes tried to exclude the proposal from its proxy through the "ordinary business" exclusion, which allows companies to omit proposals that would interfere with management functions or ordinary business operations.

The SEC staff sent a letter to Pulte dated Feb. 27 that rejected the company's argument, but did not detail why, the report said.

RiskMetrics said it is tracking 22 shareholder proposals submitted for 2008 shareholder meetings that deal with risks related to subprime mortgage lending or exposure to non-traditional mortgage investments.

It said 18 of those proposals have either been omitted due to an SEC staff judgment or withdrawn.

It also noted that a proposal from the LongView fund of Amalgamated Bank that was broadly similar to the IBEW's was allowed to be omitted by builders Ryland Group (RYL.N), KB Home (KBH.N) and Toll Brothers (TOL.N).

But LongView's proposal and the IBEW's proposal did contain different language, the report said. The IBEW's proposal for "prudent" lending practices suggests a public policy issue, whereas LongView's proposal called for a compliance committee to review regulatory, litigation and compliance risks tied to mortgage lending practices -- more of a business operation issue, it said. (Reporting Karey Wutkowski; Editing by Dan Grebler) (Additional reporting by Rachelle Younglai)