"Beazer Homes, Oliver North on line 2!"
As if weak housing numbers, declining prices, and greater buyer incentives weren't enough, Beazer Homes (NYSE: BZH) reported it fired its chief accounting officer yesterday for attempting to shred documents related to a federal mortgage-lending probe.
The homebuilder is under suspicion for steering buyers to homes in North Carolina that they couldn't afford. The FBI is conducting an informal inquiry into whether low-income buyers were issued mortgages based on their incomes rising in the future. The Federal Housing Administration prohibits such loans from being granted.
This is not the first time Beazer has knocked down one of its executives this year. In February it fired its general counsel for a violation of company ethics regarding a "pattern of personal conduct." Yet this is far more troubling, as it certainly lends credence to the appearance of impropriety.
According to The Charlotte Observer, which broke the original story, Beazer was engaged in a lot of fanciful financing deals. For example, buyers needed to put down only a $500 deposit to secure their house and at closing they'd get a check for $499 back. Beazer would pay for the down payment and the closing costs. To buy a house for $1 was too much for most people to pass up, and according to the paper, 84% of the buyers got their mortgages through Beazer Mortgage. The paper also reports that documents it examined show falsified data, though the homebuilder maintains it has followed all the laws.
The shredding of the documents, however, might just leave Beazer's reputation in tatters too.
Beazer, like virtually all of the homebuilders, has been beset by troubles since the bottom fell out of the market. The spring selling season -- which had been looked to as the start of an industry rebound -- turn out to be a flop, with grim reports being issued by Hovnanian (NYSE: HOV), Toll Brothers (NYSE: TOL), and KB Homes (NYSE: KBH).
Things haven't improved much lately, either. As Fool contributor David Lee Smith wrote last week, the National Association of Home Builders' housing market index -- the prospects for housing as viewed by builders' executives -- clocked in at a less-than-anemic 28, the lowest it's been since 1991. A turnaround isn't expected until sometime in 2008.
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Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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