Mortgage Meltdown Hits Small Builders

Wave of bankruptcies could in turn weaken regional banks
By Rob Quinn,  Newser Staff
Posted Mar 21, 2008 3:00 AM CDT
Mortgage Meltdown Hits Small Builders
Workers build a new homes at a housing complex in Palo Alto, Calif. in this Aug. 16, 2007 file photo.    (AP Photo/Paul Sakuma, file)

The housing market collapse that's sending homeowners into foreclosure is starting to hit small- and medium-size builders left with developments they're unable to sell, the Wall Street Journal reports. Buyers are canceling contracts and builders are missing mortgage payments on often highly leveraged projects. Small regional banks, in turn, could be the next victims.

The government's move to make more credit available through Freddie Mac and Fannie Mae may be too late to prevent a wave of bankruptcies. "Even rock-solid, generational businesses are taking desperate measures," the head of an industry association tells the Journal. Huge firms with deep pockets will be best able to weather the crisis and a wave of consolidation is expected. (More subprime crisis stories.)

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