Probe Report Bangs Up Beazer

Updated from 7:04 a.m. EDT

Shares of Beazer Homes (BZH) slid 10% Wednesday after the homebuilder confirmed it has gotten a request for documents from the U.S. attorney's office about its lending business.

The Atlanta-based homebuilder made the remarks in the wake of a report Tuesday that federal investigators have opened a criminal probe into its lending practices. Business Week reported that the FBI, IRS, Justice Department and the Inspector General of Housing and Urban Development are all involved in the matter.

Beazer said Wednesday it has "been told by the U.S. attorney's office that the statements by the FBI and published by Business Week were not authorized and should not have been made."

The company said there have been no allegations of wrongdoing. Beazer believes the request for documents "was fueled by the articles recently published by the Charlotte Observer. Based on our internal investigations to date, we have found no evidence to support the allegations in these articles."

The Charlotte Observer article mentioned high foreclosure rates stemming from loans Beazer originated at one of it North Carolina developments.

Last year, the company's mortgage division originated 12,205 mortgages, about 65% of the loans that Beazer homebuyers used to purchase the company's homes.

Shares of Beazer were down $3.24 to $28.17.

Prior to this potential lending debacle, Beazer was already becoming one of the worst performer of the homebuilding stocks. In January, the company recorded a hefty loss for its first quarter and offered an ugly outlook for the rest of the year.

In February, the company fired its general counsel, Kenneth Gary, for undisclosed violations of company policies. Gary also oversaw Beazer's title insurance and mortgage operations.

Last week, the company's chief financial officer, James O'Leary, resigned to become president and chief executive of Kaydon(KDN).

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