Atlanta-based Beazer, the nation's sixth-largest residential homebuilder, rode high during the heyday of the housing boom—profiting from both selling the homes it constructed and often financing the buyers as well through a wholly owned mortgage arm. It's common in the industry, but Beazer may have pushed the bounds: The North Carolina field offices of the Federal Bureau of Investigation, the Internal Revenue Service, and the Justice Dept. have recently opened a joint investigation into the company over such matters.
The Inspector General of Housing and Urban Development is also part of the group since a large percentage of Beazer's loans were made to low-income borrowers and insured by the federal government through the Government National Mortgage Assn., according to people familiar with the investigation.
Investigators, however, are not limiting their probe to possible mortgage fraud. "There's all sorts of potential fraud issues here," FBI spokesman Ken Lucas told BusinessWeek. "We're looking at all types of [potential] fraud associated with Beazer—corporate, mortgage, investments." Beazer did not comment by press time.
This is the worst possible news for the new home industry at this time. Yesterday, the Census Bureau reported a 3.9% drop in new home sales. Subprime mortgage lenders are already tightening their credit standards, and over 40 have with gone out of business, declared bankruptcy or sold their assets.
Now we learn the FBI, Justice Department and the IRS are investigating the 6th largest homebuilder in the country for "all types of potential fraud." This has the potential to cast a shadow over all homebuilders and mortgage lenders at a time when they least need negative publicity.
