Beazer Homes faces up to $15M fine for loan violations
— -- The Atlanta-based company, one of the nation's largest home builders, also said roughly two of every three buyers canceled their contracts from July to September.
Beazer is being investigated by the Securities and Exchange Commission and the U.S. Attorney's office in North Carolina on allegations that it broke rules governing down payment assistance, sold homes to low-income buyers who couldn't afford them, falsified documents and charged higher fees than the regulations allow.
In one of Beazer's subdivisions in Concord, N.C., nearly one in five homes has fallen into foreclosure, according to an analysis by The Charlotte Observer.
In Beazer's internal investigation, forensic auditors found that employees at its mortgage unit violated rules on down payment assistance for loans insured by the Federal Housing Administration.
Beazer, which has yet to reach a settlement with regulators, said its liability will be affected by "the percentage of such loans in which misrepresentations or fraud may have occurred, and the default rate, principal loan amount and losses associated with such loans."
Nationally, about 65% of people who buy a home from Beazer receive financing from its mortgage arm. But only a small fraction of buyers used FHA loans.
Wall Street investors appeared relieved by the company's estimate of fines and losses. Beazer's stock rose 20 cents to $10.13.
"It was dramatically lower, by a factor of 10 at least, than some of the numbers I had heard people kicking around," says Stephen Kim, an analyst at Citibank.
The estimate, Kim says, "seems to imply the number of violations had to be very small. It certainly did not appear to be epidemic."
The internal inquiry, though, is ongoing, and Beazer is still facing civil lawsuits from home buyers.
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