Builders' Loans Pushed Credit Meltdown

Peddling dubious mortgages to move properties helped burst bubble

By Heather McPherson, Newser User

Posted Aug 5, 2007 7:24 AM CDT

(Newser) – In the ongoing post-mortem of the housing boom, BusinessWeek turns an acute eye on developers, especially big, publicly traded builders who jumped into the mortgage business to move people into their newly built houses faster. As demand for new homes began to fizzle, they kept sales brisk by offering adjustable-rate loans to more and more marginal borrowers.

"Homebuilders really started to push these more aggressive mortgages down the throats of potential buyers to boost sales," said one expert. Wall Street added fuel to the fire, snapping up large bundles of homebuilders' loans and repackaging them as securities. Now both are paying the price: Builders saddled with ghost towns of unfinished homes, and bankers caught in the credit squeeze.

Signs indicating a home for sale by owner at a reduced price are seen, Tuesday, July 31, 2007, in Cincinnati. With the housing and mortgage industries plunging deeper into distress, investors around the... (Associated Press)

An additional sign to trumpet a reduction in the asking price stands on top of a sale sign outside an existing home for sale in south Denver in this June 23, 2007 file photo. Individuals took a shopping... (Associated Press)

Incentive banners like this one at the Cornerstone Homes housing development dot the new home development landscape in the metro area, Thursday, July 19, 2007 in Phoenix. The nation's economy could be... (Associated Press)

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Builders' Loans Pushed Credit Meltdown

Peddling dubious mortgages to move properties helped burst bubble

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More Newser Stories

Consumer Confidence, New Home Sales Slump

Grim economic indicators continue to stack up

Home Sales Plunge to 4-Year Low

Inventory glut, rising mortgage rates bode ill for quick rebound

Ex-Banker: Yeah, Collapse Was Our Fault

So why haven't homeowners been bailed out?

Goldman Preps Counterattack on Senate Report

Subcommittee's numbers are wrong, firm says

11.1M Households Underwater

Number jumps to 23.1% at end of 2010, more likely on way

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Builders' Loans Pushed Credit Meltdown

Peddling dubious mortgages to move properties helped burst bubble

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OTHER STORIES ON OUR RADAR

Wall Street • real estate • housing market • subprime mortgages • mortgage • homebuilders

MOST POPULAR STORIES

[ By Views ]

[ By Comments ]

More Newser Stories

Consumer Confidence, New Home Sales Slump

Grim economic indicators continue to stack up

Home Sales Plunge to 4-Year Low

Inventory glut, rising mortgage rates bode ill for quick rebound

Ex-Banker: Yeah, Collapse Was Our Fault

So why haven't homeowners been bailed out?

Goldman Preps Counterattack on Senate Report

Subcommittee's numbers are wrong, firm says

11.1M Households Underwater

Number jumps to 23.1% at end of 2010, more likely on way

About Us

Site

Newser By Users

Community

Site Maps

Tools

More News

What is Newser?