Thank you to UrbanDigs for breaking the news on Beazer Homes being investigated by the FBI for mortgage fraud and predatory lending practices. With almost all production builders having affiliations with or owning their own lending insitution, it was bound to happen.
The percentage of new construction home buyers using the builder's lender and title company of choice is very high. This is due to the large incentives builders were offering, but only if the consumer used the builder's lender and title company of choice.
Because these lenders were almost always a broker and sold the loan the day of settlement (literally), they seemed to only care about getting the consumer in a loan and close the deal on the sale of the property. Once the loan was sold, the risk was passed on to whomever bought the loan further decreasing how much the builder's lender cared about the risk to the consumer. Seems it hit the fan...
UPDATE: Here's the latest from Bloomberg:
"March 29 (Bloomberg) -- Beazer Homes USA Inc., the homebuilder under investigation by the FBI, received a federal grand jury subpoena for documents related to its mortgage origination business.
The U.S. Attorney in the Western District of North Carolina issued the subpoena at the request of the inspector general of the U.S. Department of Housing and Urban Development, Atlanta- based Beazer said today in a regulatory filing.
The United States Attorney has made no allegations of wrongdoing by Beazer Homes at this time,'' the company said. Beazer is cooperating with the Justice Department investigation and said it hasn't received a request for information or documents from the FBI or IRS. The FBI confirmed its probe on March 27."
According to an article in The Charlotte Observer on March 25, Beazer sold homes to low-income buyers who couldn't afford them (where have we heard that before). Beazer was assuming (betting) that the buyer's income would increase as time went on, a practice that the Federal Housing Administration (FHA) restricted in 2004.
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