TAMPA — As the housing boom revved up, few builders were as lauded as Lennar Corp.
Experts especially liked Lennar's "Everything Included" business model, which steered prospective buyers toward the company's lender, appraisers and Realtors, and away from anyone independent.
"A personal touch toward customers and employees goes a long way," raved a Fortune magazine article that praised the company's rapid growth. "In that regard, no one does it better than Lennar."
Try telling that to residents of Carriage Pointe, where half the homes are in foreclosure. Lennar provided the mortgages for 162 of Carriage Pointe's 380 homes. Since 2007, at least 74 have had foreclosure actions filed against them.
And about 87 percent of the Lennar mortgages came with adjustable rates. Those are considered particularly risky because the loan payments jump after a year or two when the interest rate goes up.
"Lennar made it pretty hard not to go with its lender," says Nick Burkel, who took two mortgages from Lennar's Universal American Mortgage Co. when he bought his Carriage Pointe house in 2006.
While banks have garnered significant blame for the bad loans that helped crash the U.S. economy, the actions of home builders have received little attention.
Pulte Homes wrote mortgages for its customers. So did Morrison Homes, KB Home and quite a few small builders.
"Builders absolutely had a large role in this," said Chris Lafakis, an economist at Moody's Economy.com. "Many of them didn't care about the performance of the mortgage because they were packaging them to investors."
Lennar's annual reports said as much during the boom years, when the company made record profits.
"Substantially all of these loans were sold within a short period in the secondary market," its 2006 annual report stated of that year's haul of 41,800 mortgages. Since most of them were sold to investors, Lennar greatly limited its exposure if the borrower couldn't pay the mortgage.
A review of the enticements offered by builders during the boom years shows how hard they worked to get customers to use their mortgage companies.
In 2006, Morrison Homes took $15,000 off closing costs if buyers got their mortgage from Morrison Financial Services. M/I Homes offered a super-low 4.75 percent interest rate for people who went with its lender. And Pulte Homes told buyers "you can stop pinching" thanks to its offer of a zero down payment and no closing costs through its mortgage arm.
Lennar had offers of its own, including a $5,000 shopping spree at Rooms-to-Go and $1,000-off trips to Best Buy and Home Depot. And buyers could skip mortgage payments for the first five months.
Even before the crash, Lennar's practices raised eyebrows. In 2007, the St. Petersburg Times wrote about Victoria Lynn Wehlau, who bought a Lennar home by putting down $100. Universal American Mortgage approved the $279,900 loan for the home, which was later foreclosed. Wehlau was 21 and autistic at the time she was approved.
Lennar denies it issued risky loans.
"I assure you that we, Lennar Corp. and Universal American Mortgage Corp., comply with all laws and best practices in the lending industry," says Marshall Ames, a Lennar spokesman.
As for Carriage Pointe, Ames says Lennar-issued loans are doing better than other loans made in the development. About 45 percent of the Lennar mortgages in Carriage Pointe defaulted. That compares to a 50 percent rate for the subdivision as a whole.
Nick Burkel, the Carriage Pointe homeowner with two mortgages from Lennar, is angry about what he calls Lennar's broken promises.
The company, he says, swore it would limit sales to investors to no more than 20 percent of the homes. A Times review of sales shows investors actually bought 60 percent of the homes.
Burkel bought his house for $236,400. It's now surrounded by empty homes once owned by people who never lived there. Its current value: $103,000.
"That was the golden rule: Don't sell to investors," Burkel says. "We don't have the community we were promised because of Lennar's greed."