Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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Joe B

Ooospie, we wanted to sell houses so we helped our buyers lie about income and amounts of down payment. Oh, you mean we can't do that? But it really helps us sell houses, and make more money, and drive up our stock price, and make our executives rich. It's against the law? Oh, only if you get caught, and we can settle for a couple million dollars, and we made much more than that by lying and cheating...

OK, you caught us, we'll pay the penalty, and promise, cross our hearts, really, really, truly to not do it again...

Well, at least until the next time.

This broadcast brought to you by the letter "S." S stands for scoundrels!!


Home Builder Says It Broke U.S. Rules and Will Restate Earnings

Published: October 12, 2007

Beazer Homes USA, a major home builder, said yesterday that it had broken federal rules to help buyers of its homes qualify for federally insured mortgages.

The statement did not indicate precisely how the rules had been broken, nor did it disclose the volume of mortgages involved. Beazer said it hoped to reach a relatively inexpensive settlement with federal regulators over the practices, which it said were related to rules governing down payment assistance for home buyers.

Beazer’s statements came as it reported that sales of new homes plunged in the third quarter. It also said it would restate several years of financial statements, with changes going back to 1999, because it had improperly used reserves to first hide earnings and then to overstate them.

Beazer previously disclosed that federal prosecutors in North Carolina had subpoenaed documents relating to its mortgage origination services. Yesterday’s announcement gave no details on that investigation, or on a formal investigation by the Securities and Exchange Commission.

The company said that as a result of its mortgage actions, it could be liable if the Federal Housing Administration, which guarantees mortgages before selling them to investors, suffered any losses from defaults on those mortgages.

The company said the practices went back to at least 2000, and involved the down payment assistance rules. It said it thought “that an adequate settlement with regulatory authorities in a range of $8 million to $15 million may be attainable.”

An F.H.A. spokesman had no comment. A company spokesman did not return a call seeking clarification of which regulatory authorities were involved. Beazer shares, which sold for more than $82 in early 2006, have fallen sharply this year amid its reports of investigations and plunging home sales. Yesterday, in what appeared to be relief that the investigation might be nearing a close, the shares rose 20 cents, to $10.13.

The company, which builds homes in the Northeast, South and West, said that it recorded net new orders for 990 homes in the quarter that ended in September, the last of its fiscal year, down 52 percent from the 2006 quarter, and 80 percent below the quarter in 2005, when the housing boom was going strong.

It pointed to “an unusually high cancellation rate” of 68 percent, which it attributed to the tight mortgage market in August and September.

With the subprime mortgage crisis causing a rising number of foreclosures, it has become very difficult to sell mortgage-backed securities unless they carry a guarantee from the F.H.A. or one of the government-sponsored lenders, Fannie Mae and Freddie Mac. To get such a guarantee, loans must meet certain specifications.

Among those specifications are down payment requirements. Buyers must put up at least 3 percent of the purchase price as a down payment, although they are allowed to get help from relatives or charities.

The F.H.A. has adopted a rule, effective at the end of this month, to close off the practice of home builders contributing to charities that then provided down payment assistance to the builders’ customers. Critics said that amounted to a way for builders to evade the rules, and the F.H.A. said mortgages that received such help were far more likely to default than were other mortgages.

That practice was legal, however, so Beazer’s practices presumably took a different form. That could have included directly providing down payment assistance without disclosing that fact to the F.H.A.

For its 2006 fiscal year, Beazer reported revenue of $6.46 billion and net earnings of $388.8 million. Before taxes, its net income was reported as $613.2 million.

Yesterday, it said those results would be reduced by two factors. It said its improper use of reserves had reduced pretax income before 2006 by about $25 million, and had increased it in that year by $20 million. It also said that improper accounting for the sale and leaseback of model homes had resulted in the reporting of $20 million of additional income through June 30 of this year. It did not say how much of that was reported in 2006.

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