National industry appointments update - 8/29/2007

NAMB applauds investigation of builders' RESPA violations MortgagePress.comRESPA violation guide National Association of Mortgage Brokers leaders applauded the U.S. Department of Housing and Urban Development, the FBI, and other state and federal agencies for moving to protect consumers from illegal lending practices by some builders' in-house or affiliated mortgage companies. "No one questions the legality of properly managed affiliated businesses," said NAMB Vice President Marc Savitt, "but we have come across many instances like those coming to light against Beazer Homes [USA] ... and I know for a fact—we're just looking at the tip of the iceberg in terms of the fraud committed." Most homebuilders offer financing to homebuyers through their in-house or affiliated mortgage companies. These affiliated companies capture about 90 percent of new home loans. Very often, these companies use an assortment of tactics to keep homebuyers from shopping for better financing terms. Sometimes they offer builder incentives or discounts, which are often made up elsewhere in the transaction. In some cases, as was alleged against Ryan Homes recently, the homebuilder and its affiliated lender used significant pressure on the homebuyer to accept mortgage financing even after they acknowledged the buyer wasn't qualified. Both of these examples violate the Real Estate Settlement Procedures Act (RESPA), enacted to protect homebuyers. FBI spokesman Ken Lucas said the bureau's Charlotte office launched a joint investigation of Beazer Homes last week with the Internal Revenue Service and HUD. Lucas said the inquiry involves fraud in general and more specifically is related to corporate, mortgage and investment issues. He said it stems from an investigation conducted by The Charlotte Observer, which found Beazer's aggressive sales tactics contributed to an unusually high foreclosure rate in many of its Charlotte-area starter-home developments. The Observer reported 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 about 13 percent. Nationally, fewer than three 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. But in the statement released by Beazer, it said internal investigations have found no evidence to support the claims in the newspaper's articles. The government conducted a limited review of Beazer's lending last year in response to Observer inquiries. The agency decided then to take no action, and Beazer voluntarily terminated the license for its Charlotte office to arrange FHA loans. However, the company can still arrange FHA loans for Charlotte-area buyers from other offices. In a statement, Beazer said it has been in contact with the U.S. attorney's office and it was cooperating with a request for unspecified documents. It said there have been no allegations of wrongdoing. The Atlanta-based company added, "Beazer Homes has a long established commitment to managing and conducting business in an honest, ethical and lawful manner." NAMB's Consumer Protection Committee, chaired by Kate Crawford, has been working for more than two years to bring this behavior to light, and in the last three months alone has been directly responsible for the recovery of more than $75,000 in consumer home deposits. "While it is gratifying to see progress being made," Savitt said, "I urge enforcement agencies in all 50 states to look into complaints waged against builders in your areas. The problems are rampant. If we are to protect homebuyers, we need regulators and law enforcement agencies to be vigilant in enforcing RESPA and other consumer protection laws." For more information, visit www.namb.org.