Since late 2006, mortgage brokers have been dropping like flies. According to the most reliable source on these matters - the mortgage implode-o-meter - so far 66 companies have gone under.
Could home builders be the next big bankruptcy growth industry? Some firms look vulnerable......

(yahoo news) When Kara Homes began building Horizons at Birch Hill, a community for active seniors, the plans were ambitious: 228 spacious residences that weren't typical cookie-cutter McMansions. But four years later, the project in Old Bridge, N.J., has been abandoned by Kara, which is now in Chapter 11. A dozen or so homes stand unfinished, the front doors swinging in the wind, and the half-built clubhouse bears a large "Unsafe for Human Occupancy" sign.

"It's not a great situation, but we're all hanging together," says Frank Ramson, one of the development's 70-odd homeowners. "What's killing us is the uncertainty of how long it might take another builder to step in."

Ramson isn't alone in his angst. The downturn in the housing market has caught the nation's homebuilders by surprise, leaving many overextended with costly land they can't develop and unfinished homes they can't sell. The financial strain is starting to show. From Arizona to Arkansas, dozens of small- and midsize builders have filed for bankruptcy over the past six months.

And in late April, credit analysts at Moody's Investors Service (NYSE:MCO - News) warned that a number of large homebuilders could fall out of compliance with their debt agreements later this year, leaving them at risk of default unless lenders come to their rescue by agreeing to rework their loans. Some builders are so desperate, in fact, that they're even running into the arms of hedge funds to bail them out with fresh loans at high rates and onerous terms.

More Bankruptcies?

Wall Street certainly has its concerns about the industry. This year the price of credit default swaps--in effect, a tool for bondholders to hedge their risks--has risen sharply for several large builders, including Pulte Homes (NYSE:PHM - News), Toll Brothers (NYSE:TOL - News), and D.R. Horton (NYSE:DHI - News). Toll Brothers Chief Financial Officer Joel Rassman says: "The people buying the swaps may think it's riskier, but the people actually buying our paper don't (because our spreads with Treasuries are shrinking)."

But for the industry as a whole, there may be even more problems waiting just below the surface since many builders entered into big land deals with partners, amassing billions in debt that doesn't show up on their balance sheets. "I think we're going to see a lot more (bankruptcy) filings in the next 6 to 12 months," says Tucson attorney Eric Slocum Sparks, who is representing one local builder, AmericaBuilt Construction, in Chapter 11. "I've got a couple of clients who want to see me next week, and I know these aren't social visits."

The extent of the industry's woes will depend on where housing heads from here. So far analysts and executives alike are unsure whether, or by how much, the slump will deepen. But the trends aren't pretty. The National Association of Realtors now predicts that new-home sales are likely to drop 18% this year, a bleaker scenario than the 9% decrease in the February forecast