Beazer exits mortgage origination business

By Chelsea Emery

NEW YORK (Reuters) - Beazer Homes USA Inc (BZH.N), struggling amid the slowdown in the housing market, said on Friday it would stop originating mortgages and would exit some homebuilding operations in four states to help cut costs and streamline the company's operations.

Shares of the Atlanta-based builder of single-family homes dropped as much as 5.8 percent after it said it would immediately discontinue its mortgage origination services through Beazer Mortgage Corp. It has also ended its related mortgage services relationship with Homebuilders Financial Network LLC.

Additionally, the seventh-largest public homebuilder is exiting some homebuilding operations in North Carolina, Ohio, South Carolina and Kentucky.

Beazer said it has entered into a new marketing services arrangement with Countrywide Financial Corp CFC.N, the nation's largest mortgage lender; Beazer will market Countrywide as the preferred mortgage provider to Beazer's customers.

"Given the increasing complexities in mortgage financing today, we believe working with an established leader in mortgage lending makes the most sense for our homebuyers and our business," said Chief Executive Officer Ian McCarthy in a statement.

The changes, part of an ongoing corporate review, will help streamline the company and better position it for a homebuilding recovery, McCarthy said. He added that the environment would remain "challenging."

"On the whole, we view these changes positively, as they will allow the company to focus its efforts and capital in more profitable markets," wrote UBS analyst David Goldberg in a note to clients. "That said, we believe they reflect Beazer's weaker positioning through the downturn versus peers."

Shares of Beazer were down 15 cents, or 1.7 percent, at $8.57 in early afternoon dealings after falling as low as $8.21. The stock has sagged 38 percent over the past 6 months.

CUTTING COSTS

The company has been slicing overhead expenses and spending and has been reducing its unsold home inventories to preserve liquidity and generate cash to weather the downturn.

Beazer will exit homebuilding operations in Charlotte, North Carolina; Columbia, South Carolina, and Lexington, Kentucky. In Ohio it will cut its Cincinnati/Dayton and Columbus units. It said it will finish all homes currently under construction and will provide ongoing warranty service to homeowners through their warranty periods.

"Although this decision will likely result in higher near-term charges, we believe it will lead to greater long-term profitability," wrote Goldberg.

Beazer said it would take charges in the first quarter related to abandoning land option contracts and to recognize inventory impairments. Because the company is in the process of restating prior periods' financial results, it is unable to quantify the amount of these charges at this time, it said.

About 5 percent of Beazer's homebuilding assets are invested in the markets affected by Friday's announcement.

Beazer also said it plans to enter the northwest Florida market in cooperation with St. Joe Co (JOE.N).