Beazer Homes receives federal subpoena
Beazer homes, headquartered in Atlanta, received a federal grand jury subpoena for documents relating to its mortgage origination business. Beazer, the 6th largest homebuilder in the country and a very active builder in the Southeast including many Charleston real estate developments is being investigated about questionable lending practices and high foreclosure rates among its customers. The probe stems from a series of articles that appeared in the Charlotte Observer in Charlotte North Carolina, another large market for the company's developments.
Reuters quoted a Bank of America Securities analyst who says, "We believe many buyers entered into aggressive mortgages due to the stretched affordability in many markets, but we think it may be difficult to prove fraud."
I've been talking about problems in the mortgage business for a while here and it is no surprise that lending practices and underwriting at Beazer and other mortgage lenders got careless regarding whether borrowers would be able to repay their mortgage by making their monthly payments on time and whether the borrowers clearly understood how the terms of the loans they were signing might change in the future.
The question is whether the current mortgage mess will lead Congress to legislate laws to curb some of the riskier alternative loans offered in recent years. If loans with little or no documentation or loans that required minimal downpayments were outlawed, the impact on the housing market would be a reduction in demand and with supply already high, would inevitably result in lower prices in the short term which we are already starting to see in some parts of the country.
Interestingly, the probe of Beazer stems from Charlotte, a market area that the recent S & P Case-Shiller index said was one of the healthier housing markets with prices not showing declines compared to some of the other areas of the country that were included in their survey.
I have a number of clients who are very happy with their homes purchased from Beazer and the mortgages they obtained through the company. My experience with Beazer Homes has been positive and the site agents that I have dealt with have always thoroughly explained everything about the home and financing to my clients.
It will be interesting to see what's (or who's) next for real estate and mortgage lending in the current real estate market environment. Stay tuned.