Beazer shares dip amid fraud probe

ATLANTA - Shares of Beazer Homes USA Inc. fell more than 8 percent yesterday after the FBI said it was among agencies investigating possible fraud in the company's mortgage-lending practices and other financial transactions.

The home builder said it was cooperating with a federal prosecutor's request for documents.

The Atlanta 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 yesterday, Beazer said it had been in contact with the U.S. Attorney's Office and was cooperating with a request for unspecified documents. It said there had 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 dropped $2.64, to $28.77, in trading on the New York Stock Exchange after briefly sinking to a 52-week low of $27.71.

Lucas, a spokesman for the FBI's Charlotte field office, said the inquiry began last week and involved "fraud in general." More specifically, he said it was related to corporate, mortgage and investment issues.

Lucas declined to release more details about the investigation. He also would not say what had 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 had foreclosed - a rate of more than 13 percent.

Nationally, fewer than 3 percent of buyers lose homes to foreclosure, the paper said.

In a series of articles, the Observer documented four examples in which the income and debts of borrowers were misstated on their applications for government-insured loans.

In its statement yesterday, Beazer said internal investigations had found no evidence to support the claims in the newspaper's articles.

The news comes amid woes in the home building sector and a recent meltdown in the subprime-mortgage sector, which has seen several lenders seek bankruptcy protection. Subprime lenders provide money, often without requiring documentation, to people with poor credit, and these companies face 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 write-downs have taken a toll on Beazer's results.

Beazer lost $59 million, or $1.54 a share, in its first quarter ended Dec. 31.