The reckoning time has arrived. Homebuilders have created a monster that wants to swallow their business. It has also created a major headache for many ordinary folks.
Many observers are now saying that it was written the boom would come to an end. It was just a matter of time. In addition to banks and conventional lenders, homebuilders entered the prosperous field of mortgage to make money. The result are half-completed, half-empty houses and subdivisions all over California and the Central Valley.
In addition to spitting out subdivisions, many of which now stand half-empty, 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 (KBH ) paid a record $3.2 million settlement in July, 2005, to resolve allegations by the Housing & Urban Development Dept. that the builder's mortgage unit overstated borrowers' income, among other practices, to obtain loan approvals. KB, which denied wrongdoing, sold its loan business before settling.
Additional Resources:
California, Central Valley's Hot Home Bargains
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