Beazer Settles Mortgage Fraud ChargesJul 2, 2009 | Parker Waichman LLP
It seems Beazer’s mortgage unit inappropriately had buyers pay discount points and did not reduce interest rates when processing federally insured loans, said the Justice Department, according to Bloomberg.com. The Justice Department also stated that Beazer allegedly gave cash gifts to potential homebuyers that were funneled through charities and which better enabled those buyers to meet down payment requirements while also neglecting income requirements, reported Bloomberg.com.
According to the Justice Department, said Bloomberg.com, unqualified homebuyers were able to obtain federally insured mortgages with inflated interest. Because of this, some mortgages defaulted causing the Federal Housing Administration to be “wrongfully required to pay inflated claims” as well as to cover property management and marketing costs. “Mortgage fraud is a top priority for this administration, especially when public dollars are at stake,” Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division, said in a statement, quoted Bloomberg.com. “We will aggressively pursue fraud on federal mortgage insurance programs.”
The Justice Department said Beazer is paying $5 million to the government and is creating a $48 million contingency fund for additional restitution, said Bloomberg.com, adding that the Department will hold off on prosecution if Beazer honors the settlement.
Meanwhile, the Securities and Exchange Commission (SEC) has sued Michael Rand, Beazer’s former chief accounting officer over allegations he “fraudulently managed earnings to meet analysts’ expectations and mislead auditors to conceal the activity,” according to Bloomberg.com. Beazer left the mortgage business in 2008.
This May, Beazer agreed to pay $2.5 million to settle an investigation by North Carolina of its home-loan unit in which it was accused of fraudulently selling discount points to borrowers. Also in May, Beazer allegedly agreed to pay $30.5 million to settle a class-action lawsuit over claims it deceived “shareholders about mortgage-lending practices,” said Bloomberg.
We wrote in April that Beazer said houses it built "may have" Chinese drywall. At that time, Beazer was preparing to test homes in its Magnolia Lakes at Gateway community in Fort Meyers. Beazer builds in more than 40 markets in the Southeast, Mid-Atlantic, Midwest, West, and Central United States, news-press.com said previously. According to news-press.com, Beazer's investigation was prompted by complaints from some Magnolia Lakes homeowners. The letter said once the complaints were made, Beazer began working with experts hired by the company, and with state.
Chinese drywall has been causing problems in newer homes across the country. The material reportedly emits sulfur fumes that fill homes with a “rotten eggs” odor. The fumes from the drywall have also been linked to corroding metals in many of the homes, and people living with the material have reported sinus and respiratory problems. Many residents have had to leave their homes because the Chinese drywall has made them unlivable, and some builders are scrambling to gut homes and replace the drywall.