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.
