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Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of Smith Dollar, PC, is licensed to practice law in California and maintains offices in Santa Rosa, California. Email Ms. Dollar
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Beazer Homes Settles Accusations of Mortgage and Accounting Fraud
Beazer Homes USA, Inc. was charged in a federal bill of information and a deferred prosecution agreement, which were filed in U.S. District Court for the Western District of North Carolina. The criminal charges and accompanying agreement relate to Beazer's participation in a fraudulent scheme designed to increase Beazer Mortgage's profit margin and sell Beazer homes, as well as an accounting fraud scheme designed to "smooth earnings." Under the deferred prosecution agreement, Beazer accepts responsibility for several fraudulent mortgage origination and accounting practices, as set forth in the separately filed bill of information.
Under the deferred prosecution agreement, Beazer agrees to pay $10,000,000 immediately toward restitution for victimized home-buyers, and additional money as Beazer recovers financially, up to $50,000,000. This $10,000,000 includes the $2,500,000 Beazer paid to the North Carolina Commissioner of Banks in May 2009 to provide restitution to North Carolina victim home-buyers, and the remaining $7,500,000 will be paid into a national restitution fund. Any additional payments, up to $50,000,000, will be paid into the national restitution fund. Any monies in the national restitution fund that are unclaimed by victimized home-buyers after the expiration of the agreement will revert to the Federal Housing Administration, subject to the terms and limitations in a separate civil agreement between Beazer and the Civil Division of the U.S. Department of Justice and the U.S. Department of Housing and Urban Development.
As described more fully in the bill of information, Beazer and its subsidiary, Beazer Mortgage Corporation, admit to engaging in several fraudulent mortgage origination practices, including (1) fraudulently retaining so-called "discount points" that should have been used to provide some home-buyers with a decreased interest rate; (2) fraudulently informing some home-buyers that they were receiving a "gift" from a charity to cover their down-payment when, in truth, the price of the home was increased to offset the supposed "gift;" (3) fraudulently circumventing the "Neighborhood Watch" and "Credit Watch" programs of the Department of Housing and Urban Development to avoid action from HUD in response to the high foreclosure rate of some Beazer Mortgage offices; and (4) instituting a strategy of willful blindness with regard to some stated income loans.
According to the bill of information, Beazer also admits to having engaged in a scheme to commit securities fraud by practicing a form of what is commonly known as "cookie jar accounting." Specifically, when Beazer's financial performance was stronger than needed, Beazer decreased its net income through the manipulation of a variety of "reserve" accounts. This manipulation left Beazer with excess reserves and excess balances, which it then was able to use to "smooth earnings" as needed.
The deferred prosecution agreement recognizes several important factors considered by the United States in reaching this agreement. These include (a) the efforts undertaken by Beazer's Audit Committee to investigate and report to the United States, regarding the fraudulent mortgage and accounting practices; (b) Beazer's cessation of the business activities of Beazer Mortgage and the consequent elimination of any risk of further fraudulent mortgage practices; (c) Beazer's adoption of remedial measures, including the termination of executives and employees it identified as responsible for the misconduct; (d) Beazer's commitment to continue to cooperate with the United States in its ongoing investigation; (e) Beazer's commitment to provide appropriate restitution to buyers in cooperation with the North Carolina Commissioner of Banks and through the establishment of a national restitution fund; (f) the Chief Executive Officer and Chief Operating Officer's voluntary contribution of the funds they received from their 2008 yearend bonuses to the restitution fund; (g) Beazer's commitment to provide appropriate restitution to the Federal Housing Administration as part of a separate civil agreement; and (h) the recognition that the imposition of additional criminal penalties or the requirement of additional payment at this time would jeopardize the solvency of Beazer and put at risk the employment of approximately 15,000 employees and full-time contractors not involved in the criminal wrongdoing.
Acting U.S. Attorney Edward R. Ryan said, "Mortgage fraud devastates those who become victims while pursuing the American Dream, as well as the neighborhoods impacted by foreclosures. Today's agreement holds the company responsible for the fraud of its employees, and puts money back in the hands of victimized home-owners."
"At this time of uncertainty in the mortgage market, it is especially important that all lenders, including builder-affiliated lenders, are held to the highest standards of conduct," said HUD Secretary Shaun Donovan. "This action shows that the Administration is serious about making the mortgage market as safe as possible for American home buyers, and will crack down on those who violate their trust."
"The current economy is causing people to question the business practices of lending institutions, and the recent actions of Beazer Homes further compound those concerns. However, Beazer is taking responsibility for the damage it has done and the customers hurt by its actions. This case shows Charlotte and the rest of the nation that the federal government is working diligently to restore the faith we all once held. We are holding people accountable," said Owen D. Harris, Special Agent in Charge of the Charlotte Division of the FBI.
"This settlement not only provides relief for homeowners harmed by Beazer's practices, but it highlights the potential for abuse when homebuilders push borrowers to use the builder's mortgage company," said North Carolina Deputy Commissioner of Banks, Mark Pearce. "We appreciate the U.S. Attorney's Office's leadership in coordinating this wide-ranging and complex investigation."
"The North Carolina Real Estate Commission is committed to the fight against mortgage fraud. We are pleased that we were able to partner with the U.S. Attorney's Office in the Western District and each of the other agencies involved in this complicated and detailed investigation and work together to bring about a result that includes restitution to so many consumer victims, both in North Carolina and nationwide," said Janet B. Thoren, Chief Deputy Legal Counsel, North Carolina Real Estate Commission.
Today's announcement is made by Acting U. S. Attorney Edward R. Ryan of the Western District of N.C., along with Secretary of Housing and Urban Development Shaun Donovan; Owen D. Harris, Special Agent in Charge of Federal Bureau of Investigation Operations in North Carolina; Jeannine A. Hammett, Special Agent in Charge, Internal Revenue Service, Criminal Investigative Division; Keith Fixel, Inspector in Charge, United States Postal Inspection Service; Fernando Ramos, Special Agent in Charge, Office of the Inspector General, Department of Housing and Urban Development, Joseph A. Smith, Jr., Commissioner of Banks for North Carolina, and the North Carolina Real Estate Commission.
The Acting U.S. Attorney commends the thorough investigation by the FBI, the Criminal Division of the IRS, the U.S. Postal Inspection Service, the Office of the Inspector General of HUD, the North Carolina Commissioner of Banks, and the North Carolina Real Estate Commission which resulted in the resolution of this matter. Acting U.S. Attorney Ryan added that the Securities and Exchange Commission provided invaluable assistance during the investigation, in conjunction with their parallel investigation. The government is represented in this matter by Assistant United States Attorneys Matthew T. Martens and Kurt W. Meyers of the U.S. Attorney's Criminal Division in Charlotte.
Interesting how a massive fraud scheme on the part of a large builder can be made to “go away” by throwing enough money at the problem. There still seems to be two sets of standards in this country. All the “small” fraud cases see people rightly being sent to jail. But the large fraud cases, Beazer, Fannie Mae, Freddie Mac, et. al. involve financial settlements but no jail time.
As long as the government maintains two sets of rules for fraud, there will always be fraud.
Posted by on 07/02 at 09:50 AM
If you don’t enforce the law at the top, you can’t expect to enforce it at the bottom. The Fed. has got to stop coddling racketeers. The world is watching.
Posted by on 07/02 at 05:02 PM
This is a joke. It goes on to show that big corporations can simply out muscle the law. Think about it, read the boards and you will see that if someone lies on their loan application, they can get 5-10 years. Then you have a big mammoth doing all kind of criminal things and they pay it back and on the go. It is almost like robbing a bank, and when the robber gets caught, he offers to return the money back and he goes on with his life.
Posted by on 07/04 at 08:17 AM
I am very upset by the series of events that have happen to my family within the last 6 months. I entered into a lease purchase agreement that stated I had up to a year or 2 to purchase the house. I was working on getting my credit up to par. I gave the owner $2000.00 down and an additional $1100.00 for the first months rent. We were paying faithfully until March 2009, we received a letter from HUD as well as the mortage company that the house was in foreclosure. We contacted the owner and he stated that it was all a mistake. We continued to pay him and we received a letter stating that the house was still in foreclosure and his loan modification was denied. I really love the house! He keeps pressuring us to give him money. I am really afraid of him because he is a pathological lier. He has gone from a Phyiscal Therapist, Banker, Ambulance Driver, Manager at Shoney’s, Business Owner all in 6 months.I can’t really afford to leave right now. We are still in the house he is over $10,000 behind in the house note. Someone please help me I have two kids and no where to go. Should I leave and the house is vacate for months or am i entitled to my $2000.00 deposist back.
Bend Oregon Event to Help Homeowners Prevent Foreclosures Oregon.Gov
As part of an ongoing effort to help homeowners avoid foreclosure, state agencies are organizing a foreclosure-prevention event in Bend on Saturday, March 27, 2010.
Shelbyville Man Gets 2-Year Sentence For Loan Fraud Chattanoogan.Com
Prosecutor Gary Humble said the lost was approximately $2.3 million in the mortgage fraud involving hundreds of homes in the Shelbyville area.
Lend America, VP Ashley Banned from FHA Housing Wire
Michael Ashley, the embattled former vice president of Federal Housing Administration (FHA)-backed mortgage originator Lend America, and the company he worked for, were permanently banned from doing business in the industry last week.
Countrywide Tries to Pin Blame on Insurer Court House News
Countrywide Home Loans demands $111 million from Triad Guaranty Insurance, claiming Triad is trying to blame mortgage lenders for the insurer's role in the housing bubble and collapse.
Investors Say They Were Swindled in Property Scheme Fox 13 Now
Utah Division of Consumer Protection is joining forces with a few investors who claim they have been cheated by an agency called "Utah Mini Ranches.
Greenfield Man Accused of Housing Scam The Republic
A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said.
Appraisal Institute Opposes Obama Administration's Plan for Homeowner 'Short Sales' PR News Wire
Citing concerns about increased mortgage fraud, four organizations representing more than 35,000 real estate appraisers today voiced their opposition to changes to an Obama administration program that will encourage "short sales" of homes.
Ownership Rights to Get Another Look TBO.Com
State lawmakers may beef up protections of property owners' rights by rewriting a law this spring that is at the center of a case of alleged fraud in Pasco County.
Defaulted Loans May Haunt Seniors On Line WSJ.Com
A little-noticed law could soon result in smaller Social Security checks for hundreds of thousands of the elderly and disabled who owe the U.S. money from defaulted loans and other debts more than a decade old.
Oregon to Help Homeowners Prevent Foreclosures CBS State
As part of an ongoing effort to help homeowners avoid foreclosure, state agencies are organizing a foreclosure-prevention event in Bend on Saturday, March 27, 2010.
Thursday, February 18, 2010 F. Jeffrey Miller Trial Continued Testimony
As reported by Anne Mitchell, who viewed the trial:
Angela Parenza worked for Jeff Miller as the office manager for 7 or 8 years beginning in 1998. Parenza was indicted along with Miller and pled guilty to conspiracy to commit bank fraud and money laundering. Parenza testified that Miller or his contractors allegedly preferred to build all the...
Wednesday, February 10, 2010 F. Jeffrey Miller Trial Coverage Continued - Witness Testimony
Steve Middleton Testimony - Coverage Provided by Anne Mitchell
The Government continued in its cross examination of Steve Middleton. He was shown several HUD-1 statements involving sales of homes located in Overland Park, KS, and Olathe, KS. The HUD statements each allegedly showed line items of payments to (James) Moser & Associates, LLC's...
Monday, February 01, 2010 F. Jeffrey Miller Trial Coverage - Continued Witness Examination
According to Anne Mitchell, who is present in court for the trial:
Next Witness: Kelly Sanford
Kelly Sanford of the Federal Reserve was a short witness for the Government. Sanford manages electronic payments between banks and member financial institutions. He was shown copies of wire transfers and asked whether they coincided with the counts in...
Wednesday, January 27, 2010 F. Jeffrey Miller Trial - Prosecution Witnesses Continued
According to Anne Mitchell, who is viewing the trial:
January 13, 2010
Witness: Rick Hayes
Rick Hayes testified that on the day that he closed on his Miller Enterprise home, he received a phone call from the Kansas Banking Commission informing him that his loan was fraudulent. After the Hayes responded to a classified ad, they met with John...
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The information and notices contained on Mortgage Fraud Blog are intended to summarize recent developments in mortgage fraud cases and mortgage banking matters nationwide. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about mortgage banking, mortgage fraud matters or who believe they require legal counsel should seek the advice of an attorney. The creators, editors and sponsors of Mortgage Fraud Blog do not intend to create a confidential relationship or an attorney-client relationship by communication via or arising from this site.
Rachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of 
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