Builder/Lender To Cough Up Million$ In Settlement With Feds Over Fraud Allegations That It Screwed Over Homebuyers In Loan Application Process

In Charlotte, North Carolina, The Charlotte Observer reports:

• Federal investigators [last week] filed mortgage and accounting fraud charges against Beazer Homes USA, but the homebuilder will escape prosecution because it agreed to pay $50 million to victims and accepted responsibility for its actions. The charges, entered in U.S. District Court in Charlotte, relate to Beazer's participation in a scheme designed to fraudulently increase its mortgage company's profits and sell homes, as well as an accounting scheme designed to "smooth earnings." As a result, authorities said, homebuyers defaulted on their loans, and neighborhoods plagued with foreclosures watched home values plummet.(1)

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• Under the agreement with the U.S. Attorney's office, the homebuilder accepts responsibility for fraudulent practices and will pay $10 million immediately toward restitution for victimized homebuyers, plus additional money up to a total of $50 million as the company recovers financially. The U.S. Attorney's office has agreed not to prosecute the company as long as it satisfies its obligations in the next five years.

For more, see Beazer agrees to pay victims $50 million.

For the U.S. Department of Justice press release, see United States Settles False Claims Act Allegations Against National Home Builder and Mortgage Lender:

• Beazer Homes USA Inc. has agreed to pay the United States $5 million dollars, plus contingent payments of up to $48 million dollars to be shared with victimized private homeowners, to resolve allegations that it, and Beazer Mortgage Corp., were involved in fraudulent mortgage origination activities in connection with federally insured mortgages.

(1) According to the Department of Justice, the settlement resolves allegations that when Beazer Mortgage Corp. made Federal Housing Administration (FHA) insured mortgage loans for the purchase of homes built by Beazer Homes USA Inc., 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.