Beazer, Countrywide Team Up

Embattled builder Beazer Homes(BZH Quote - Cramer on BZH - Stock Picks) plans to send its mortgage business to another struggling company: Countrywide Financial(CFC Quote - Cramer on CFC - Stock Picks).

Beazer, an Atlanta-based homebuilder slammed by the housing downturn and investigations into its mortgage practices, said Friday that it will exit the mortgage-origination business. In turn, the company has signed a marketing deal with Countrywide that will make the lending giant the preferred mortgage provider for Beazer customers.

Countrywide, itself ravaged by increasing loan defaults, is set to be acquired by Bank of America(BAC Quote - Cramer on BAC - Stock Picks).

"Given the increasing complexities in mortgage financing today, we believe working with an established leader in mortgage lending makes the most sense for our homebuyers and our business," said Beazer President and CEO Ian McCarthy.

Beazer's mortgage business has been the subject of Justice Department and Securities and Exchange Commission probes over the past year for its lending practices. Beazer also had its own internal probe, and is in the process of restating its results for the past two years after the investigation turned up accounting errors.

Amid the restatements, the company hasn't filed its financial reports for the year ended Sept. 30, and has released only selected data for the interim periods. The company reported last week that home closings for the quarter ended Dec. 31 tumbled 24% from the prior year, while new orders fell 29%.

Beazer said Friday that it will exit its homebuilding operations in Charlotte, N.C.; Cincinnati/Dayton, Ohio; Columbia, S.C.; Columbus, Ohio; and Lexington, Ky. amid the ongoing housing slump. At June 30, the markets represented about 5% of Beazer's homebuilding assets.

"We continue to make reductions in direct costs, overhead expenses and land spending, as well as unsold home inventories and believe the actions we have taken to preserve liquidity and generate cash will enable us to successfully weather the downturn," said McCarthy. "At the same time, we believe the strategic actions we are announcing today will position us well to take advantage of opportunities that will arise when our markets begin to recover."

Shares of Beazer recently were down 20 cents, or 2.3%, to $8.51.