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
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)
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(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.