Big Homebuilders' Lending Practices Fueled Mortgage Debacle (Bus. Wk.)

[JPZenger]

http://www.msnbc.msn.com/id/20145724/page/1/

"By rushing into lending, homebuilders helped fuel the housing crisis
Business Week, Aug 6, 2007

...Rather than send the Mottos to a bank, their builder, Beazer Homes USA Inc., offered to provide a mortgage itself in an arrangement of the sort that helped fuel the long housing boom across the country. ...when it appeared that the Mottos might not qualify financially for the loan, things took a troubling turn. Beazer, ... inflated the pair's earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving.

... The Mottos haven't succeeded in unloading their previous home... They have nearly $1 million in mortgage debt on the two dwellings. ... they are "on the brink of foreclosure" on both houses.
... Beazer revealed that the SEC had elevated an informal inquiry into its mortgage business to a formal investigation. The company warned that criminal penalties could follow. ... Beazer received a subpoena from the Justice Dept. seeking documents related to its home loans, and the company is also under civil investigation by the North Carolina Attorney General's office.

... builders jumped into the mortgage business to a degree they never had. Wall Street provided the same encouragement it offered other lenders. Even as the housing supply began to exceed demand last year, builders kept sales brisk by pushing adjustable-rate, interest-only, and other risky loans. In some cases they attracted clientele who couldn't afford conventional mortgages. In others, builders allegedly violated federal lending standards to get customers to sign on the dotted line. KB Home paid a record $3.2 million settlement in July, 2005, to resolve allegations ... that the builder's mortgage unit overstated borrowers' income...

...Several developments built recently near Columbus, Ohio, by Dominion Homes Inc., are scarred with empty houses, overgrown yards, and front windows with neon-orange foreclosure stickers. Dominion often offered "buy-down" mortgages in which it forgave or reduced early payments, according to borrowers. One young couple, the Gunthers, say this enticement helped persuade them to borrow all of the $180,300 they paid in 2004 for a home... Kelly claims Dominion told her the couple's initial monthly payment of $1,160 would rise $100 a year, to $1,360 in 2006. In fact, the payment rose by more than $200 a month each year, to $1,599. She says Dominion salespeople described annual homeowner association fees of $50 a year that ballooned to $285, while taxes turned out to be double the company's projection."

[flamin lib]

1. I know for a fact that many lenders did exactly the same thing to

qualify people for loans. I refused to participate in a sale (I'm an agent) because the loan officer falsely claimed rental income on a property where there was none. Cost me $5k but I still have my license and breathe air not filtered through iron bars.

[AlCzervik]

2. we had an offer from out homebuilder to use their financing and if we did

we would have "Gotten $10,000 in upgrades for free!!!!" well we declined, i was also a realtor and knew the score. We got a traditional 15 year fixed and what really pissed the homebuilder off was that i hired a home inspector--"But but it's a brand new home, you don't it inspected" Yeah riiiight and they were even more pissed when the home inspector came back with a punch list.