Homebuilder to exit mortgage business and promote Countrywide as a preferred mortgage provider; plans to restate financial results from prior years.
February 1 2008: 11:03 AM EST
ATLANTA (AP) -- Homebuilder Beazer Homes USA Inc. said Friday it will no longer originate mortgages and will offer its buyers mortgage services through Countrywide Financial Corp.
The Atlanta-based company also released preliminary first quarter operating data, and it said it will stop building homes in several communities.
Mortgage origination services through Beazer Mortgage Corp. will end immediately and the company said it has ended a related mortgage services relationship with Homebuilders Financial Network, LLC.
The company will instead market Countrywide as the preferred mortgage provider to customers.
Beazer will pull out of Charlotte, N.C.; areas around Cincinnati, Columbus and Dayton, Ohio; Columbia, S.C.; and Lexington, Ky. A timetable for the exit in those markets was not specified.
New home sales: Biggest drop ever
As of June 30, 2007, roughly 5% of the company's homebuilding assets were invested in those markets.
As for its financials, Beazer Homes said it currently expects its results for the first quarter of fiscal 2008 to include material charges to abandon land option contracts and to recognize inventory impairments. It did not quantify the amounts because of plans to restate results from prior years.
The company also reiterated that home closings for its quarter ended Dec. 31 totaled 2,010, a 24% decline from the same period in the prior fiscal year. Net new home orders totaled 1,260, a decline of 29% from the prior fiscal year. The company saw a 46% cancellation rate in the quarter.
The company has said it would restate financials for a three-year period after an internal probe found employees in its mortgage origination unit violated federal lending rules. The company has said it received a subpoena from the United States Attorney's office in the Western District of North Carolina seeking documents related to the mortgage service.
Beazer previously disclosed that its former chief accounting officer may have inflated reserves and other accrued liabilities in earlier periods.
The Securities and Exchange Commission has launched a formal investigation of Beazer to determine whether any person or entity related to the company violated federal securities laws.
A shareholder advisory group has since urged Beazer's board to fire Chief Executive Ian McCarthy. The board has not complied.
Beazer has been beset by turmoil in the housing industry that has caused its number of home closings to plunge. It cut 650 jobs, or 25% of its work force, in October, and suspended its quarterly dividend.
Beazer (BZH, Fortune 500) shares lost 3% in morning trading Friday.
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