Beazer Homes has issued a statement regarding the Business Week article that is causing a stir in this stock after-hours. Here are the guts of the release:
At this time, Beazer Homes can not comment on or verify any investigation. However, we will fully cooperate with any investigation by any government agency.
We build homes nationwide. The allegations by the Charlotte Observer focused primarily on one Charlotte subdivision, Southern Chase. In that subdivision, Beazer Mortgage Corporation originated the loans for the borrowers and served as a broker, not a lender. We were involved on the front end of the loan transaction process, compiling the necessary information, which we then submitted to the lender for underwriting review. The ultimate underwriting decision for the loan rested with the lender.
Based on our internal investigations to date, we have not found any evidence to support the allegations in the Charlotte Observer.
Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner.
NOTES ON THIS STATEMENT
In the first sentence of the piece I ran I noted an "if there is truth to these reports" because Business Week is not really the sort of service that usually breaks this sort of news. The statement is a bit odd in that they haven’t really addressed the problem, and the severity of this may have caught them off guard. Unfortunately for the company, we live in a world where your discrepancies are stored almost perpetually and where if you are investigated then you are just presumed guilty.
BZH shares have fallen more to -15% at $26.64 in after-hours. Traders need to be aware that there have been all sorts of discussions on what sort of tricks that homebuilders have used a) to sell homes and b) to keep "prices high." There have obviously been some mortgage games played in the last 18 months, which is an understatement if there ever was one. What the end will be is not yet known, but traders are definitely shooting first and asking questions later. I
If these allegations are true, Kaydon (KDN-NYSE) may find itself under a cloud or at least have a brand new CEO that is cleaning up a situation outside of the job he was hired for. Last week on Wednesday, March 21, Kaydon appointed James O’Leary as CEO & President. Prior to that date, he was the CFO of Beazer and just announced his resignation last week.
Jon C. Ogg
March 27, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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