Beazer Homes Faces FBI Investigation, ALL Homebuilders DOWN AFTERHOURS

Discussion in 'Wall St. News' started by S2007S, Mar 27, 2007.

  1. S2007S


    Beazer Homes Faces FBI Investigation
    Tuesday March 27, 6:52 pm ET
    Feds Looking Into Fraud Allegations Involving Homebuilder Beazer; Stock Plunges

    ATLANTA (AP) -- Beazer Homes USA Inc., which has recently suffered hefty losses amid a downturn in the housing market, now faces a federal investigation of mortgage fraud and other allegations involving the homebuilder. Beazer shares plunged 15 percent in after-hours trading Tuesday.

    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, launched an investigation of Beazer Homes last week, FBI agent Ken Lucas said Tuesday.

    Lucas, a spokesman for the FBI's Charlotte field office, said the inquiry involves "fraud in general" and more specifically is related to corporate, mortgage and investment issues.

    Asked whether investigators would seek to question corporate officers and subpoena company records, Lucas said he wasn't sure.

    "We just started this," Lucas said.

    Lucas declined to release more details about the investigation. He also would not say what prompted the inquiry.

    In a written statement, Beazer said it "can not comment on or verify any investigation. However, we will fully cooperate with any investigation by any government agency."

    "Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner," the statement said.

    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 have foreclosed -- a rate above 13 percent.

    Nationally, fewer than 3 percent of buyers lose homes to foreclosure, the paper said. In its series, The Observer documented four examples where the income and debts of borrowers were misstated on their applications for government-insured loans.

    Beazer shares dropped $4.72 to $26.69 in aftermarket electronic trading after closing down 91 cents, or 2.8 percent, at $31.41 on the New York Stock Exchange.

    Last week, Beazer Homes said that its chief financial officer, James O'Leary, was stepping down after four years with the homebuilder to become president and chief executive of Kaydon Corp.

    Beazer has suffered from the housing downturn. Weak demand for new homes, sales at steep discounts and the need for inventory writedowns have taken a toll on the company's results.

    Losses for the first quarter ended Dec. 31 totaled $59 million, compared with a profit of $89.9 million in the same period a year earlier, while revenue slid to $806.4 million from $1.1 billion in the year-ago period.
  2. blast19

    blast19 dumped out pretty good after the close. I was going to post that but forgot.

    It's going to make the mortgage/builders companies see a lot of red tomorrow.

    I have no doubts that the whole industry in under investigation now...FBI/DOJ/SEC...I'm sure they're all over these companies.

    Deservedly so in my opinion. :)
  3. S2007S


    hah, I'm laughing because I remember weeks ago when everyone started buying up the homebuilders as if the bottom was in, now look where they are... what a bunch of fools. At the time TOL came within reach of 52 week highs I wrote over and over that these stocks were headed back down 25%, well its happening right now. I think there is PLENTY OF DOWNSIDE left in homebuilders.
  4. man i saw this in the charlotte observer yesterday and thought it had been priced in already :(
  5. S2007S


    nope, nothing is priced in yet.
  6. hmmm.. I wondering if BZH will become NEW. Hell, time to buy PUTS on this bad boy - it might be worth the gamble.

    Hell, this might start another round of sell off just like the subprime mess.
  7. Listen, where you were calling to short homebuiders with doom & gloom is still below where the pre market is trading them down now. You have been on the homebuilder bashing streak for 6 months.

    For all you know some hedge fund is massively short and decided to use some government contacts to help their position. It is unclear exactly who was falsifying info, the fact is that the whole mortgage broker industry did this at full intensity.

    I am just saying, these stocks have sold off significantly from their highs back in 2005. On top of that, they have historically been traded at very low P/Es because of how sensitive they are to credit cycles. Most of the problems were priced ages ago.
  8. craneman


    I was thinking something a little broader like HGX puts when I read this earlier. It likely will cause weakness across the whole sector and you wouldn't be gambling on a single stock.
  9. LEND and others had the same story. Also, don't discount the fact that elections are coming. Congressmen will try to hunt and punish aggressive lenders. Our elected officials have to show us that they care :eek:

    Housing will be back, but imo, this sector is a short atm

    i just posted on another an interesting story

  10. LEND, NEW and the alikes are nothing but paper pushing companies. They do not operate with hard assets or inventory. I equate their mortgage games to derivatives, it can all become worthless at the drop of a dime.

    It's different with homebuilders because they operate with hard assets & inventory. They do have liquidation value, and it's a lot higher than the doom & gloomers think.
    #10     Mar 28, 2007