Shares of Beazer Homes USA Inc. fell more than 8 percent Wednesday after the FBI said it is among agencies investigating possible fraud in the company’s mortgage lending practices and other financial transactions. The homebuilder said it was cooperating with a federal prosecutor’s request for documents.
The Atlanta-based company, which has suffered hefty losses amid a downturn in the housing market, is the subject of an investigation by the FBI and the U.S. attorney’s office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, FBI agent Ken Lucas said Tuesday.
In a statement Wednesday morning, Beazer said it has been in contact with the U.S. attorney’s office and it was cooperating with a request for unspecified documents. It said there have been no allegations of wrongdoing.
“Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner,” the statement said.
Beazer shares fell $2.64, or 8.4 percent, to close at $28.77 on the New York Stock Exchange after briefly sinking to a 52-week low of $27.71. Its shares had been down more than 17 percent in premarket trading.
Lucas, a spokesman for the FBI’s Charlotte field office, said the inquiry began last week and involves “fraud in general” and more specifically is related to corporate, mortgage and investment issues.
Lucas declined to release more details about the investigation. He also would not say what prompted the inquiry.
The Charlotte Observer reported last week that the company had an unusually high rate of foreclosures in many developments around North Carolina’s largest city. The paper reported that of the 2,900 Beazer homes built in Mecklenburg County between 1997 and 2006, at least 388 have foreclosed — a rate above 13 percent.
Nationally, fewer than 3 percent of buyers lose homes to foreclosure, the paper said. In its series, The Observer documented four examples where the income and debts of borrowers were misstated on their applications for government-insured loans.
But in the statement Wednesday, Beazer said internal investigations have found no evidence to support the claims in the newspaper’s articles.
The news comes amid woes in the homebuilding sector and a recent meltdown in the subprime mortgage sector that has seen several lenders seek bankruptcy protection. Subprime lenders loan money to people with poor credit, and they have faced surging default rates as interest rates have risen while homes have been losing value in a softening market.
Weak demand for new homes, sales at steep discounts and the need for inventory writedowns have taken a toll on the company’s results.
Beazer lost $59 million, or $1.54 per share, in its first quarter ended Dec. 31 compared with a profit of $89.9 million, or $2 per share, a year ago. Revenue slid to $806.4 million from $1.1 billion in the year-ago period.
Last week, Beazer said that its chief financial officer, James O’Leary, was stepping down after four years with the homebuilder to become president and chief executive of Kaydon Corp.
Beazer is a major single-family homebuilder with operations in 21 states across the country. It also provides mortgage origination and title services to its homebuyers.