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Beazer leaving area amid investigations
Beazer Homes USA, a home builder under federal investigation, said Friday it will stop building in the Charlotte market and close its national mortgage unit -- a business in which it says employees violated federal housing regulations. The Atlanta company gave no timetable for the withdrawal. Beazer's statement also said it will stop building in Columbia, in Lexington, Ky., and in Cincinnati, Dayton and Columbus, Ohio. The company said it will complete homes under construction and continue providing warranty services.
Beazer leaving area amid investigations
Builder gives no exit date, but vows to finish homes it has begun
Beazer Homes USA, a home builder under federal investigation, said Friday it will stop building in the Charlotte market and close its national mortgage unit -- a business in which it says employees violated federal housing regulations.
The Atlanta company gave no timetable for the withdrawal. Beazer's statement also said it will stop building in Columbia, in Lexington, Ky., and in Cincinnati, Dayton and Columbus, Ohio. The company said it will complete homes under construction and continue providing warranty services.
Beazer said it will pair with Countrywide Financial as a preferred mortgage lender. Countrywide, the nation's largest mortgage lender, has become the poster child of the U.S. mortgage crisis prompted by lending to people with sketchy credit and enabling some to buy houses they couldn't afford. Charlotte's Bank of America is buying the troubled lender.
An Observer investigation last year found high rates of foreclosure in some Charlotte-area Beazer projects and that the company arranged loans some buyers couldn't afford.
The Observer report triggered investigations by the FBI and the Department of Housing and Urban Development. In October, the company acknowledged employees had violated federal regulations. That could have cost Beazer its ability to offer government-backed loans nationwide, severely reducing the number of buyers for its homes.
The closing of Beazer Mortgage comes amid a severe national housing slump and mortgage crisis that has forced many companies to halt lending. For Beazer, the closure could be a step toward preserving its building business.
Exiting the mortgage business "helps them get out of the mess," said Chip MacDonald, a partner at law firm Jones Day in Atlanta who does not do work for Beazer. "If they're no longer in the business, they're more likely to reach a settlement fast with the regulators. They wouldn't be worried about continuing supervision and compliance. There's a lot of good reasons to do this."
Gary Lacefield, a former HUD investigator, agreed Beazer could be better positioned to settle with regulators. However, he said, they will still be liable for defaults on any loans that were fraudulently made.
"They're telling HUD `We're out of this business. Tell us what it's going to cost us to settle up,' " said Lacefield, president of Risk Mitigation Group, a Texas consulting firm that advises lenders. "It might mitigate but not eliminate those charges out there."
He advised home buyers to shop around for mortgages rather than accepting terms from lenders working with builders. Such preferred lender arrangements are common but might not always provide the best deal.
Bank of America said it has 200 partnerships with builders, ranging from renting office space at design centers to joint marketing arrangements. The bank declined comment on Beazer's partnership with Countrywide.
`There goes the neighborhood'
April Amos said she had trouble working with Beazer Mortgage in 1999 when she and her husband bought a starter home in southwest Charlotte.
After settling in, they watched as houses around them were foreclosed on. In 2006, they were able to sell and built another new house in the nearby, more upscale Berewick community. Last year, she says, she was distressed to see Beazer start building in the project, although she says the houses are beautiful.
"It was kind of scary," said Amos, who works for the county. "We thought, `Oh, God, there goes the neighborhood.' "
She said her husband, a machinist, saw movers taking furniture out of model homes on Thursday. Homeowners in other projects also have said model homes are being converted for sale.
Beazer's departure leaves projects unfinished, and homeowners worry what will happen to unfinished lots. That won't be resolved until Beazer finds buyers. The company said Friday that it is evaluating land holdings "to determine the appropriate methods and timing for disposition."
The company has not responded to Observer queries for several weeks about whether it was leaving the market. On Friday, Thomas Bruce, Beazer's president for the Charlotte market, e-mailed a statement saying, in part; "Homebuyers currently in backlog will be contacted directly by Beazer Homes with further information and details."
Mecklenburg County records show Beazer owns 144 acres. The company also has projects outside the county, including Mountain Laurel in Concord and River View in Lowell.
Chuck Graham, a Charlotte real estate consultant, said potential buyers might include some of the large builders already in the market. Those could include C.P. Morgan, KB Home and Eastwood Homes, he said.
Blair Kendall, a spokeswoman for Indianapolis-based Morgan, said the company hadn't talked with Beazer but "we're always looking."
Faison and Associates owns the Berewick tract where Beazer has been building under a plan that called for 178 houses. That contract has been terminated, said a Faison spokesman. Beazer had closed on 30 of the lots.
Several companies are building in Berewick, planned to cover more than 1,000 acres. The development is more upscale than the starter homes that dominated Beazer work in the Charlotte area. Developers say it is a very desirable project that is likely to attract interested builders.
Market's rise and fall
Beazer entered the Charlotte market in 1987 with the purchase of Squires Homes, doubled its market share with the 2002 acquisition of Crossman Communities and became one of the area's largest builders.
Beazer rode the national housing boom, fueled in part by lax lending. High foreclosures forced lenders to clamp down on credit, helping push the country to the brink of recession.
The Observer identified 10 Beazer developments in Mecklenburg County last year that had foreclosure rates of 20 percent or greater. The newspaper 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.
The company is in the midst of an internal investigation, has delayed filing federal financial reports and said it will have to restate financial results for several years. The company also has fired at least two top executives, including its chief accounting officer who was attempting to destroy documents during an internal investigation.
Beazer, like many builders, has scaled back as housing sales plummet. The company had an unusually high rate of canceled orders in the third quarter last year and has blamed negative publicity.
Beazer has halved its work force, including 650 jobs cut in October. Bruce's e-mail on Friday said the company currently has 18 employees in Charlotte.
The company's stock fell below $5 a share last month, more than 90 percent off its all-time high two years ago. Homebuilder stocks have rallied recently in response to interest rate cuts. On Friday, Beazer stock closed at $9.31, up 60 cents.
-- Staff writers Doug Smith, Ted Mellnik, Rick Rothacker and researcher Sara Klemmer contributed.
-- Stella Hopkins: 704-358-5173
http://www.charlotte.com/local/story/474054.html
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