The inspector general of the Department of Housing and Urban Development is accusing the Department of Justice of soft-pedaling its investigation into Beazer Homes, an Atlanta-based homebuilder that was at the heart of the nation's housing crisis.
According to documents obtained by CNBC, the inspector general claims the Department of Justice blocked an investigation and watered down the settlement amount that Beazer ultimately paid.
That 2009 $50 million settlement "provided too little restitution" compared to losses suffered, the inspector general said.
The story began in 2007, when Beazer—which was one of the country's 10 largest home builders—first came under investigation after allegations of mortgage fraud.
That year, an article in the Charlotte Observer revealed that 77 buyers in a Beazer development of 406 homes had gone into foreclosure, a rate well above the national average.
In a letter to Senator Chuck Grassley (R-Iowa),the inspector general said that's when he began investigating allegations that Beazer engaged in fraud against the Federal Housing Administration.
Inspector General Kenneth Donohue also complains that U.S. Attorney General Eric Holder has not responded to a letter he sent on this matter in July. Today, Grassley sent his own letter to Holder asking for a response to the inspector general's allegations.
Representatives for Beazer and the Department of Justice did not respond to CNBC's request for comment.
Shares of Beazer , which closed at $4.12 in regular New York trade, were lower in extended trading.