Beazer Homes Settles With DOJ

Posted by Orb Staff on July 02, 2009 No Comments
Categories : Residential Mortgage

Homes USA Inc. has agreed to pay the U.S. $5 million, plus contingent payments of up to $48 million to be shared with victimized private homeowners, to resolve allegations that it, and its now-defunct Beazer Mortgage Corp. subsidiary, were involved in fraudulent mortgage origination activities in connection with federally insured mortgages. The Department of Justice (DOJ) alleges that when Beazer Mortgage Corp. made Federal Housing Administration (FHA) insured mortgage loans for the purchase of homes built by Beazer Homes, the companies fraudulently and improperly required purchasers to pay ‘interest discount points’ at closing, but then kept the cash and failed to reduce interest rates; provided cash ‘gifts’ to home purchasers through certain charities, so purchasers could come up with minimum required down payments, with assurances the gifts would not have to be repaid, and then increased home purchase prices to offset the amount of the gifts; obscured which of its branches made defaulting mortgage loans to avoid FHA detection of excessive default rates; and ignored stated-income requirements in making loans to unqualified purchasers. "We deeply regret these matters and have used what we have learned to strengthen our control and compliance culture and reinforce our absolute commitment to act according to the highest standards of ethical conduct throughout our organization," said Beazer Homes' president and CEO, Ian J. McCarthy, in a published statement. The settlement is in conjunction with a Deferred Prosecution Agreement (DPA) entered into between the companies and the U.S. Attorney's Office for the Western District of North Carolina. The DPA provides for restitution to private homeowners who were victims of the companies' fraudulent activities, as well as to the FHA. Under the DPA, the attorney's office has agreed not to prosecute Beazer Homes in connection with the matters that were the subject of the audit committee investigation, provided that the company satisfies its obligations under the DPA over the next 60 months. ‘At this time of uncertainty in the mortgage market, it is especially important that lenders, including builder-affiliated lenders, are held to the highest standards of conduct,’ commented HUD Secretary Shaun Donovan in a statement. SOURCES: Department of Justice, Beaze

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