Feds probing "potential fraud" at Beazer
NEW YORK (Reuters) - Authorities are investigating the lending practices at Beazer Homes USA Inc. (BZH.N), BusinessWeek reported on Tuesday, sending shares in the sixth largest U.S. home builder almost 17 percent lower.
Beazer Homes said in a statement it could not comment on or verify any investigation, but added that it would "fully cooperate with any investigation by any government agency".
BusinessWeek said the North Carolina field offices of the Federal Bureau of Investigation, the Internal Revenue Service and the Justice Department recently opened a joint probe into the home builder's lending practices.
A representative at the FBI's office in Charlotte, North Carolina, told Reuters late on Tuesday that the agency was "conducting a potential fraud investigation" regarding Beazer, but had no other comment.
Atlanta-based Beazer focuses much of its business on first-time home buyers.
The Inspector General of Housing and Urban Development (HUD) 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, BusinessWeek said.
The U.S. attorney's office in Charlotte, North Carolina, would neither confirm nor deny an investigation into Beazer, a spokeswoman said.
The HUD inspector general's office would neither confirm nor deny a probe.
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, BusinessWeek said.
The Observer's investigation alleged that foreclosure rates in several Beazer developments ran at around 20 percent, compared with the national average of 3 percent.
At the time, Beazer said in a written statement the high foreclosure rates were an anomaly, BusinessWeek reported.
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, adding that 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.
"We have not found any evidence to support the allegations in the Charlotte Observer," Beazer said in its statement, adding that the allegations by the newspaper 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."
"The ultimate underwriting decision for the loan rested with the lender," Beazer added.
Shares in Beazer fell almost 17 percent in after-hours trading but recovered some poise to trade down 15.5 percent at $26.54 from a close of $31.41 on the New York Stock Exchange.
(Additional reporting by John Crawley in Washington, D.C. and Karen Jacobs in Charlotte, North Carolina)
