Federal Officials Contact Beazer
Over Mortgage-Lending Business

Home builder Beazer Homes USA Inc. Wednesday confirmed it has been in contact with federal officials regarding its mortgage-lending business, but said at this time there are no allegations of wrongdoing.

The Atlanta company said the U.S. Attorney's Office requested documents generally relating to its mortgage business. Beazer Homes said it's fully cooperating with this request.

In early trading Wednesday, Beazer's shares fell $3.15, or 10%, to change hands $28.26.

Beazer said an internal investigation found no evidence to support allegations in recent articles published by the Charlotte Observer. The newspaper described allegations of questionable loans arranged for buyers and an unusually high foreclosure rate in a Beazer housing development in North Carolina.

The FBI is conducting the investigation jointly with the Department of Housing and Urban Development and the Internal Revenue Service.

Beazer also said the U.S. Attorney's Office said statements made by the Federal Bureau of Investigation weren't authorized and shouldn't have been made.

The probe comes as mortgage lenders have come under scrutiny by regulators in recent months. Defaults on subprime loans to borrowers with sketchy credit histories have risen amid falling or stagnant housing prices. Like Beazer, many large home builders have in-house mortgage units, which arrange loans for buyers. A handful has come under scrutiny by federal agencies in recent years, partly because of rising foreclosures and questionable underwriting practices.

Two top executives have left Beazer in recent months. Last week, Chief Financial Officer James O'Leary announced his resignation, effective two days later. Mr. O'Leary left to take a job as chief executive of Kaydon Corp., a designer and manufacturer of engineered products for the aerospace, energy and medical industries. Mr. O'Leary said his decision wasn't related to problems in the housing market.

In a Securities and Exchange Commission filing last month, Beazer said general counsel Kenneth J. Gary was terminated for cause "for a pattern of personal conduct which includes violations of company policies." The company declined to give further details.

-- Michael Corkery contributed to this article.

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