US authorities have started investigating the lending practices at Beazer Homes USA Inc., BusinessWeek reported on Tuesday. The news sent a shock wave to the stock market sending shares of the sixth largest U.S. home builder almost 17 percent lower. Amid the subprime meltdown, mortgage brokers and lenders that cater to risky borrowers have come under fire and one major homebuilder seems to be facing the music. Investigators have opened a criminal probe into lending practices at the firm.
Homebuilder stocks opened lower on the second day, Wednesday, as fears that an investigation of Beazer Homes USA could spread to other companies, a day after another builder posted disappointing results and retracted guidance. According to the reports, the investigation is being was being investigated by a number of government agencies that include the Federal Bureau of Investigation, the Internal Revenue Service and the Justice Department.
In the meanwhile, the company has confirmed that it has received a request for documents generally relating to its mortgage business from the U.S. Attorney’s Office. Though, the company in question said in a statement it could not comment on or verify any investigation, but added that it would fully cooperate with any investigation by any government agency.
The Beazer investigation is just another twist in the subprime meltdown, marking the first known federal investigation into the mortgage lending arm of a national homebuilder. A number of major home builders operate finance companies to aid customers in buying their houses. Those businesses and the broader home-lending industry have come under scanner as defaults among the riskiest of those loans, called subprime, have increased alarmingly.
