Report: Beazer Target of Fed Probe

Updated from 4:52 p.m. EDT

Federal investigators have opened a criminal probe into the lending practices of homebuilder Beazer Homes(BZH), according to a Business Week report Tuesday.

The news sent shares of the company plunging $5.11, or 16%, to $26.30 in after-hours trading.

The Federal Bureau of Investigation, the Internal Revenue Service, the Justice Department and the Inspector General of Housing and Urban Development are all involved in the matter, Business Week said. The report cited an FBI spokesman and other people familiar with the probe.

The probe is related to a recent report in The Charlotte Observer that looked at significantly higher-than-average foreclosure rates for Beazer homes and allegations of abusive lending practices.

In a statement late Tuesday, Beazer said it cannot comment on or verify any investigation.

The builder said, however, that it hasn't found any evidence to support the allegations raised in The Charlotte Observer series. Beazer said the newspaper's report focused on one subdivision for which its mortgage business originated the loans for the borrowers and served as a broker, not a lender.

The news of the probe comes as the subprime mortgage industry has been slammed by rising delinquencies and criticisms of its lending practices. An investigation into Beazer, however, would mark the first time a major homebuilder has been brought into the recent lending ruckus.

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