Home builder under investigation by FBI: Inquiry into `potential fraud' tied to Charlotte-area foreclosures.

Byline: Binyamin Appelbaum

Mar. 28--The federal government has launched a criminal investigation of "potential fraud" by Beazer Homes USA, including the builder's role in arranging mortgage loans for buyers in its subdivisions. FBI spokesman Ken Lucas said the bureau's Charlotte office launched a joint investigation of Beazer last week with the Internal Revenue Service and the Department of Housing and Urban Development. Lucas said the inquiry stems from an Observer investigation, published last week, which found Beazer's aggressive sales tactics contributed to an unusually high foreclosure rate in many of its Charlotte-area starter-home developments.

In a statement, Beazer said it can't "comment on or verify any investigation. However, we will fully cooperate with any investigation by any government agency." The Atlanta company added, "Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner." Rising numbers of foreclosures have focused regulatory scrutiny on companies that sold mortgage loans to low-income families over the last decade. Lending companies have received most of the attention, particularly so-called subprime lenders that make loans with high interest rates. Beazer operated as a builder and a mortgage broker, matching borrowers with lenders.

Many of the nation's largest home builders arrange loans for their buyers. Beazer is the first such company to come under investigation during the current wave of concern about foreclosures. In Southern Chase, a Beazer starter home development in Cabarrus County, 77 buyers lost homes to foreclosure in a subdivision of 406 houses. That's a rate of about one home in five, more than six times the national average.

The Observer found at least 10 Beazer developments in Mecklenburg County that had even higher rates of foreclosure. In Southern Chase, Beazer arranged larger loans than some buyers could afford. That allowed it to include the cost of financial incentives in the price of homes. Some of Beazer's actions violated federal lending rules, the Observer found. The Observer also documented four instances of loans arranged by Beazer that were approved based on misstated information about applicants' income and debts. Knowingly falsifying information on a loan application is a federal crime. Beazer said in its statement, "Based on our internal investigations to date, we have not found any evidence to support the allegations in the Charlotte Observer." Said Observer Editor Rick Thames: "What we reported is documented and out there for Beazer and everyone else to see. We began tracking an abnormally high rate of foreclosures in the Charlotte area more than a year ago. That research eventually led us to subdivisions built by Beazer." In the Charlotte area, the loans arranged by Beazer for buyers in its subdivisions were often insured by the Federal Housing Administration. The Observer found that FHA loans were associated with more foreclosures in Charlotte than any other kind of loan in recent years. HUD, which supervises the FHA, told the Observer Friday that it is reviewing lending records from Charlotte and other cities to determine whether Beazer complied with federal lending regulations. Beazer emphasized in its statement Tuesday that the loans it arranged were ultimately approved and funded by those lenders. About three-quarters of Beazer's FHA loans in the Charlotte area were ...