Home Builder agreed to pay $5 million to Private Homeowners

ASHINGTON (Reuters) -- Beazer Homes USA Inc. agreed to pay $5 million to the U.S. government and up to $48 million to private homeowners to settle allegations that it was involved in fraudulent mortgage activities, the Justice Department said Wednesday.

The settlement resolved allegations that Beazer and its mortgage unit, Beazer Mortgage Corp. (BZH), in making Federal Housing Administration insured loans were involved in fraudulent mortgage origination activities, the department said.

The Justice Department, which has focused on pursuing mortgage fraud cases during the economic downturn, said as a result of Beazer's alleged activities unqualified home buyers were "induced" to enter into FHA insured mortgages and interest rates for the loans were "improperly inflated."

The U.S. government agreed not to prosecute the company in connection with the case if the firm satisfies its obligations under the deferred prosecution agreement over the next 60 months.
In Atlanta, the company said in a statement that it has fully cooperated with the investigations by various government authorities and that it had reached a settlement.

"We deeply regret these matters and have used what we have learned to strengthen our control and compliance culture and reinforce our absolute commitment to act according to the highest standards of ethical conduct," said Ian McCarthy, president and chief executive officer.

Separately, the U.S. Securities and Exchange Commission Wednesday accused Michael Rand, a former chief accounting officer at Beazer, of running a fraudulent scheme to manipulate the builder's results.

Often-Overlooked CA Legislation at Heart of Mortgage Crisis

California Civil Code Section 1632 is an often over-looked law that requires banks and lenders to provide contracts in the borrower's native language. The law stipulates that any person engaged in a business that negotiates primarily in a language other than English - including in Spanish, Chinese, Tagalog, Vietnamese, Korean, etc. - either orally or in writing, must deliver a translation of the contracts or agreements to the borrower before they are executed. The translation must include every term and condition in the contract or agreement. The documents must be provided to the borrowers in advance of execution so that borrowers have time to review the material without the pressure of the pen in front of them. Put in place to protect people whose 'financial literacy,' or understanding of financial terminology, may be limited based on language and life experience, violation of this law seems to be at the heart of the mortgage crisis in California where over 12 million people speak a language other than English.



In the years leading up to the current mortgage crisis there were campaigns by low-income housing groups, Hispanic lawmakers, and others to increase homeownership among Latinos and other immigrant groups. Unfortunately for many of these people, the loan originators providing them with information about the loans did not comply with the terms of this law. Many of the people facing foreclosure today are there because they did not clearly understand what they were signing. They were explained the benefits of the loan in their native language but were not given the entire picture. Future adjustments to payments were glossed over. The concept that they might lose their equity was not explained. Few were given opportunity to review the documents in advance. Most signed documents that were not in their native language.



Other states have similar laws to protect non-English speaking borrowers. There are also several Federal laws that offer protection to the American consumer. Though the laws are somewhat broad in scope, they are designed to protect consumers from unfair lending practices, pursuant to the Federal Truth in Lending Act, as amended (15 U.S.C. Sec. 1601 et seq.). These laws give the victim the right to rescind the contract or agreement if the other party fails to comply with their provisions.



The combination of limited "financial literacy" and lenders and brokers eager to make a bigger profit deepened the problems in states such as California, Nevada and Florida where there are large numbers of immigrants. Though many of the borrowers facing foreclosure today have a legitimate defense against foreclosure actions, the vast majority are unaware that they have any rights in this matter. Unaware of the very laws that exists to protect their rights many will accept their fate and lose their home in the process. This is a serious problem that extends beyond the current crisis and one that real estate attorneys should pay attention to in today's climate.
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Author Resource:- Sean Rutledge represents both plaintiffs and defendants in civil litigation with an emphasis on consumer protection and consumer rights as it pertains to real estate law. As the Managing Director at United Law Group, he manages the firms' Manhattan and Irvine offices.

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