GO
Loading...

Feds Probe Lending Practices at Beazer

U.S. authorities are investigating the lending practices and some other dealings at Beazer Homes USA, one of the largest U.S. home builders. Beazer's stock fell nearly 17% in after-hours trading.

The FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, launched an investigation of Beazer Homes last week, FBI agent Ken Lucas said Tuesday.

Lucas, a spokesman for the FBI's Charlotte field office, said the inquiry involves "fraud in general" and more specifically is related to corporate, mortgage and investment issues.

Asked whether investigators would seek to question corporate officers and subpoena company records, Lucas said he wasn't sure. "We just started this," Lucas said.

Lucas declined to release more details about the investigation. He also would not say what prompted the inquiry.

Beazer Homes said in a statement it could not comment on or verify any investigation, but added, "However, we will fully cooperate with any investigation by any government agency."

Beazer is based in Atlanta, Georgia. It is the sixth largest U.S. home builder and focuses much of its business on first-time home buyers.

The Inspector General of Housing and Urban Development is also part of the investigative group because a large number of Beazer's loans were made to low-income borrowers and insured by the Government National Mortgage Association.

The investigation follows a series of articles published by The Charlotte Observer newspaper in March, which detailed allegations of abusive lending practices and high foreclosures in a number of Beazer developments, according to a report in BusinessWeek.

The Observer's investigation alleged that foreclosure rates in several Beazer developments ran at around 20%, compared with the national average of 3%. At the time, Beazer said in a written statement the high foreclosure rates were an anomaly, BusinessWeek said.

Last week, a North Carolina law firm filed a lawsuit in state court seeking class-action status against Beazer, accusing the home builder and its mortgage company of selling mortgages to unqualified buyers.

The suit was filed on behalf of a couple who bought a home from Beazer in 2001. The couple was featured in the Observer's investigation, said their attorney Matthew Arnold of Andresen & Associates. Arnold said the law firm was not involved in the federal investigation.

The lawsuit said Beazer Mortgage would advise or encourage prospective buyers to falsify information in their loan applications. The suit also said the company changed information on loan applications by the prospective buyers for buyers to qualify to buy a home in the Beazer subdivision.

The suit seeks damages for each class member of less than $74,999.

Beazer said in its statement that based on its internal investigations to date, "We have not found any evidence to support the allegations in the Charlotte Observer." Beazer said in the statement the allegations by the Observer focused primarily on one Charlotte subdivision, Southern Chase.

"In that subdivision, Beazer Mortgage Corp. originated the loans for the borrowers and served as a broker, not a lender.

"We were involved on the front end of the loan transaction process, compiling the necessary information, which we then submitted to the lender for underwriting review. The ultimate underwriting decision for the loan rested with the lender," Beazer said.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More

Don't Miss

U.S. Video