Atlanta-based Beazer Homes USA Inc. and Beazer Mortgage Corp. have consented to pay a hefty amount to resolve charges that the two companies engaged in fraudulent mortgage origination practices with federally insured mortgages.

FHA – the Federal Housing Administration – guarantees home mortgages for families with low and low-to-moderate income. The government alleged that when Beazer Mortgage made FHA-backed mortgages for houses built by Beazer Homes, the two companies engaged in several fraudulent practices. First, the Beazer companies required home buyers to pay “interest discount points,” and then kept the extra cash without reducing interest rates. Second, the companies helped buyers come up with the necessary down payment by providing buyers with cash “gifts” from charity organizations and then hiked up the home purchase prices to cover the amount of the gifts. Third, the companies prevented FHA detection of the Beazer operation’s excessive default rates by hiding which branches had made defaulting mortgage loans. Finally, the companies dispensed with “stated income” requirements when loaning money to unqualified purchasers.

By engaging in this conduct, the Beazer companies violated the federal False Claims Act. The practices left the FHA holding the bag for numerous mortgages on which unwitting purchasers were forced to default. The government’s settlement with the Beazer companies will be shared with victimized private homeowners.

For the full story, go to Department of Justice’s Press Release.