Homebuilders Sinking Into the Subprime Mess

The news of an FBI probe into Beazer (BZH) is a reminder that as the mortgage mess spreads, Beazer isn't the only builder to have a captive mortgage company to provide incentives so people can get into homes. (Though, as appears to be the case with the foreclosures in question at Beazer, not necessarily afford them.)

KB Homes (KBI), for example, teamed with Countrywide (CFC) in a joint venture that was created in 2005. According to KB's 10-K, "We believe that the ability to offer customers a variety of financing options on competitive terms as a part of the sales process is an important factor in completing sales."

D.R. Horton (DHI) runs DHI Mortgage, it's own mortgage operation. Ditto for Lennar (LEN), Pulte (PHM) and others, including Centex (CTX), whose own mortgage company, according to its 10-K, provided 75% financing last year for all non-cash sales.

That doesn't necessarily mean there will be Beazer-like problem with any others, but a scan of the housing supplements in the Sunday newspapers over the past year showed that as sales fell, builders started offering more than a few incentives. The beat goes on...