Beazer exiting mortgage business, markets

ATLANTA -- Homebuilder Beazer Homes USA Inc., which is under investigation in North Carolina, said Friday it will no longer originate mortgages and will offer its buyers mortgage services through Countrywide Financial Corp.

The Atlanta-based company also released preliminary first quarter operating data, and it said it will discontinue its homebuilding operations in Charlotte, N.C., and several other communities.

The company said it will discontinue mortgage origination services through Beazer Mortgage Corp., effective immediately, and has ended its related mortgage services relationship with Homebuilders Financial Network, LLC.

The company will instead market Countrywide as the preferred mortgage provider to Beazer Homes' customers.

Along with Charlotte, Beazer said it also plans to exit its homebuilding operations in the Cincinnati and Dayton, Ohio, area; Columbia, S.C.; Columbus, Ohio; and Lexington, Ky. A timetable for the exit was not specified.

As of June 30, roughly 5 percent of the company's homebuilding assets were invested in those markets.

As for its financials, Beazer Homes said it currently expects its results for the first quarter of fiscal 2008 to include material charges to abandon land option contracts and to recognize inventory impairments. It did not quantify the amounts due to its plans to restate results from prior years.

The company also reiterated that home closings for its quarter ended Dec. 31 totaled 2,010, a 24 percent decline from the same period in the prior fiscal year. Net new home orders totaled 1,260, a decline of 29 percent from the prior fiscal year. The company saw a 46 percent cancellation rate in the quarter.

The company has said previously it would restate financials for a three-year period after an internal probe found employees in its mortgage origination unit violated federal lending rules.

The company has said it received a subpoena from the U.S. Attorney's Office in the Western District of North Carolina seeking documents related to the mortgage service. A lawsuit filed against the company by 10 home buyers said fraudulent tactics were so pervasive in a Beazer housing development in Charlotte that corporate management must have participated or condoned the approach.

Beazer also had previously disclosed that its former chief accounting officer may have inflated reserves and other accrued liabilities in earlier periods.

The Securities and Exchange Commission has launched a formal investigation of Beazer to determine whether any person or entity related to the company violated federal securities laws.

A shareholder advisory group has since urged Beazer's board to fire Chief Executive Ian McCarthy. The board has not complied.

Beazer has been beset by turmoil in the housing industry that has caused its number of home closings to plunge. It cut 650 jobs, or 25 percent of its work force, in October, and suspended its quarterly dividend.

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