It's not clear exactly what Beazer Homes USA is accused of doing that is said to have brought on the full onslaught of federal agency investigators, from the FBI to the IRS.
However, it does appear to be clear that the catalyst was a series of stories in the Charlotte Observer. That series documented mortgage foreclosure rates exceeding 20% in several Mecklenburg County, N.C. low-income subdivisions built and sold by Beazer. That series presented two cases in which Beazer Mortgage, a unit of Beazer USA, allegedly failed to document that borrowers applying for FHA loans could afford the monthly payments, as required by law. It also documented five cases in which borrowers were charged "several times" the maximum loan fees allowed by FHA.
Beazer has denied any wrongdoing, and it said it would cooperate with the investigations.
So how much exposure do other builders have to the same sort of circumstances? The question was asked of Sandra Stewart, a partner in the Los Angeles-based law firm, Cox, Castle & Nicholson who represents homebuilders, developers and lenders in complicated litigation.
While Stewart couldn't speak to Beazer's situation at all, she did address the issue of making sure that common sense good business practices are in place that might prevent employees from committing fraud, and, if fraud happens, how to insulate the company from potential liability.
Adapting to changing market conditions requires special vigilance, she says.
"Step No. 1 is to make sure that there are lines of communication that are constantly open between the field and your management to the extent that when sales people are detecting a change in the market management can take that into account."
Step No. 2 is to have an ongoing training process in place, which is even more critical when you are staffing up or staffing down because those processes put employees in unfamiliar job situations.
Step 3, "If there is a change in the market then management has to evaluate what impact, if any, that has on any of the existing procedures. "For example, if there is a change in the type of loan products out there that your customers are getting, you need to make sure they (sales people) understand it."
"And we have to continue to monitor the actual implementation and make sure that our training is sticking," Stewart said.
Disclosures to consumers can also help insulate from liability, she said. For instance, most builders have disclosures in place that say they are not their customers' financial advisors. It is not a builder's obligation to protect buyers from buying a house the builder thinks they can't afford. The builder isn't in a position to make that decision.
Of course, making that point clear to a buyer who is getting a mortgage from a builder's lending company becomes a bit difficult, especially when you have the salesperson and the loan officer sharing information about customers' credit.