One of the biggest construction workers unions on Thursday warned of more housing problems ahead -- particularly for borrowers living in new-home communities -- and lays much of the blame on the nation's home builders.
Homeowners who purchased at newer developments are more likely to have 100%-financed, adjustable-rate mortgages because of builders' efforts to push risky subprime loans, according to a report from the Laborers' International Union of North America. As a result, the report claims, certain new-home communities are now littered with vacancies created by foreclosures that are pushing prices down.
Zeroing in on Maricopa County in Arizona, the report found that more than a third of mortgages made by the finance arms of three major builders there -- KB Home, Lennar Corp. and Richmond American Homes -- were five-year ARMs set to adjust in 2010 and 2011.
"At the height of the housing boom, the home builders were increasingly relying on predatory and risky mortgage products . . . in order to qualify customers for houses which were sold at what are now clearly inflated prices," the union's report said.
On Thursday, the union, whose members were among the first hit by the housing downturn, protested builders' practices outside KB Home's Westwood headquarters. On hand were several Buckeye, Ariz., homeowners who said they were facing foreclosure because they were underwater -- owing more on their mortgages than their homes' worth -- and were finding it difficult to make monthly payments.
KB Home spokeswoman Lindsay Stephenson disputed the union's claims.
"We rest well knowing we delivered the American dream in the form of a quality home to thousands of satisfied KB Home customers," she said. "We want every KB Home owner to know that we stand ready to assist them in any way we can to ensure that they are pleased with their purchase."