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Beazer Mortgage Done

Parent said mortgage originations will immediately be discontinued

February 1, 2008

By SAM GARCIA


Embattled Beazer Mortgage Corp. is calling it quits.

Parent Beazer Homes USA Inc. today announced it would immediately discontinue mortgage origination services through the unit.

In addition, the Atlanta-based company said it will end its mortgage services relationship with Homebuilders Financial Network.

Expenses related to its exit have not yet been determined because of an ongoing investigation by the company's audit committee.

The move will impact about 60 remaining Beazer Mortgage employees, Leslie H. Kratcoski, a spokeswoman for Beazer Homes, told MortgageDaily.com.

The homebuilder was subpoenaed by the U.S. Attorney's Office in the Western District of North Carolina in March, according to a FORM 8-K filing with the Securities and Exchange Commission. The subpoena, issued at the request of the Department of Housing and Urban Development's Office of Inspector General, sought mortgage origination documents, the filing said.

The investigations were focused on loans secured by homes in at least one North Carolina subdivision.

In October, Beazer disclosed that provisions of the U.S. Department of Housing and Urban Development down payment assistance regulations were violated on FHA-insured loans by employees of Beazer Mortgage Corp. The violations dated back to 2000 and could leave the company liable for civil litigation expense as well as losses to HUD and mortgage purchasers.

Beazer, which is in the process of restating its financials, said it discovered the abuse through an independent investigation by its board of directors' audit committee, the law firm of Alston & Bird LLP and the forensic accounting firm of Navigant Consulting Inc. It hoped to negotiate a settlement with regulators for between $8 million and $15 million.

Today's announcement indicated the homebuilder entered into an agreement with Countrywide Financial Corp. to refer prospective buyers to dedicated Countrywide loan counselors serving all of the builder's communities.

"Beazer Homes will market Countrywide as the preferred mortgage provider to Beazer Homes' customers," the release stated.

In addition, Beazer said it will exit its homebuilding operations in Charlotte, N.C.; Cincinnati, Columbus and Dayton, Ohio; Columbia, S.C.; and Lexington, Ky.

"We believe the strategic actions we are announcing today will position us well to take advantage of opportunities that will arise when our markets begin to recover," Beazer President and Chief Executive Officer Ian J. McCarthy said in the statement. "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."


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]


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