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6A TUESDAY, MARCH 20, 2007 • • • THE CHARLOTTE OBSERVER | www.charlotte.com
foreclosures result. Rentersmove in. Crime can rise.
“It was a disaster,” says Veronica Wilkes, who bought ahouse from Beazer in 2001 in thenorthwest Charlotte subdivisionof Brookmere.
Beazer built 31 homes on herstreet. Thirteen have foreclosed.
“There was trash all over thestreets, kids walking throughyour yard,” says Wilkes, whonow rents out her home becauseshe can’t sell it. “You could tellthe homeowners – their yardswere nice and pretty, and theother yards were terrible.”
A story in Sunday’s Observercharted the impact of foreclo-sures on Southern Chase, a Ca-barrus County neighborhoodwhere Beazer built 406 homes.Seventy-seven of the homeshave foreclosed, a rate of 19 per-cent.
In a written statement, At-lanta-based Beazer originallysaid the foreclosure rate inSouthern Chase was an anoma-ly.
When the Observer pre-sented its findings about the 10Mecklenburg developmentswith higher foreclosure rates,Beazer referred to its earlierstatement. The company said itsdevelopments were marketed tofirst-time buyers, who tend toforeclose more often.
Beazer also said that it “iscommitted to providing qualityhomes of superior value andproviding each and every home-owner with an enjoyable cus-tomer experience.”
The company’s CEO, Ian Mc-Carthy, declined to speak withthe Observer.
Government-insured loans
Beazer’s troubled develop-ments were backed by a silentpartner: the federal govern-ment.
More than 70 percent of thebuyers in the 10 developmentsused loans insured by the Fed-eral Housing Administration.The FHA encourages mortgagelending to lower-income fami-lies by promising to pay thelender if the borrower does not.
In one of the developments,Back Creek Hollow in northeastMecklenburg, 64 of 70 buyersused FHA-insured loans. Sev-enteen of those homes havesince foreclosed, a rate of morethan one in four.
The largest source of FHAloans in the Beazer develop-ments was Beazer itself.
A subsidiary called BeazerMortgage acted as a broker,matching buyers with lendersfor a fee of several thousand dol-lars on each loan.
The FHA loans that BeazerMortgage arranged often wereaggressive. The company pro-vided down payments for mostof its borrowers, leaving themwith little stake in the homes. Italso arranged loans with
monthly payments that startedlow but rose sharply after thefirst and second years, a featureknown as a buydown.
Both down-payment gifts andbuydowns were associated witha higher risk of foreclosure, theObserver found.
Beazer and Eastwood Homesbuilt on the same streets inSteelecroft Place, a subdivision
GARY O’BRIEN – [email protected]
People move in and out often, Stewarts Crossing homeowners told the Observer. “We’ve had a lot of for-sale signs,” says Amina Johnson, who bought her house in 2000. Onein 3 houses have foreclosed in the neighborhood in northeast Mecklenburg County.
Foreclosures clustered in 10 Beazer neighborhoods
–––––––Clusters from 1A
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Clumps of Beazer Foreclosures
1. Amber Ridge
2. Stewarts Crossing
3. Back Creek Hollow
4. Barrington
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in southwest Charlotte. East-wood built slightly more thanhalf the subdivision’s 360homes; Beazer built the rest.The houses are intermixed,sometimes on alternating lots.
Twenty percent of the Beazerhomes have foreclosed, com-pared with 8 percent of the East-wood homes.
The prices were similar. The
Beazer homes have an average taxvalue of $138,000; the Eastwoodhomes, an average of $147,000.
The financing was different.Two-thirds of Beazer’s buyers usedFHA loans with low introductorypayments that increased after thefirst and second years. About 5 per-cent of Eastwood’s buyers usedthat kind of FHA buydown loan.
In a written statement, Beazersaid that it followed all laws andregulations and that offering fi-nancial assistance to first-timebuyers was a common industrypractice.
The company also emphasizedthat it acts solely as a mortgagebroker and that loans are ulti-mately approved or rejected by thelender. The company said buyersare informed of loan terms andsign documents at the closing tableto indicate their understandingand acceptance.
Low cost, big problems
The county’s foreclosure prob-lems are concentrated in newneighborhoods with the lowestprices.
Derhyl Pruitt, a local real estateagent, said he tells first-time buy-ers, “If you can possibly stretch topay $180,000, that will eliminate
the problems.”Beazer itself built some devel-
opments in slightly higher priceranges. Those homes are rela-tively untouched by foreclosures.
In Beazer’s 13 developmentswith average tax values above$150,000, less than 5 percent ofhomes have foreclosed.
In the 20 developments withaverage tax values below$150,000, almost 18 percent ofhomes have foreclosed.
The Beazer development withthe highest foreclosure rate wasin the Avensong subdivision, ineastern Mecklenburg County.
Beazer built 155 homes in a sec-tion called Stewarts Crossing be-tween 1999 and 2001. Fifty-two ofthose homes have foreclosed.
Avensong also contains a sec-tion of about 160 houses built byColony Homes and sold at higherprices. Twelve of those homeshave foreclosed.
Karen and Loren Pittman havewatched with alarm as one-thirdof their neighbors fell into fore-closure.
The Pittmans moved to Stew-arts Crossing in May 2000. Theypaid $119,500 for a house withthree bedrooms and 1,295 squarefeet.
They wanted a low-pricedhome so Karen could quit workand raise their children.
The next year, the county cutthe tax value of the house by11 percent to $106,100.
The couple have watchedrenters move in. Karen worriesabout her safety and doesn’twalk on some streets. Tax valuesare rising now, but the Pittmansaren’t sure that will carry over tosales prices.
“I would never buy into aneighborhood like this oneagain,” she said. “We had no ideaanything like this could happen.”
Binyamin Appelbaum: 704-358-5170,[email protected] Hammersly Munn: 704-358-5886,[email protected]
What Is a Foreclosure?When a homeowner falls behind
on mortgage payments, the lendercan ask a court to seize the homeand sell it to cover the debt.
Lenders asked courts in NorthCarolina to foreclose a record45,500 homes last year, more thandouble the number in 2000.
Roughly half these filings endwith an actual foreclosure. Theremaining owners repay the loanby selling or refinancing, filing forbankruptcy, or striking a deal withthe lender.
What It Means to You
Foreclosed owners lose theirhome, their neighborhood, theirinvestment. Borrowing moneybecomes very hard and veryexpensive.
Some homes sit empty. Othersbecome rentals. Communities aredestabilized. Neighboring homeslose value. Crime sometimes rises.
Local governments lose propertytax revenues. They also pay toprocess the foreclosure and forpublic safety issues associatedwith vacant buildings. Theiraverage cost runs into thousandsof dollars, according to a 2005study by Harvard Universityresearchers.
Contact Us
Lost your home? Struggling tohold on? Live in a neighborhoodplagued by foreclosures? We’d liketo hear your story. [email protected] or call704-358-5170.
PART TWO OF FOURSold a nightmare
Federal reviewThe Observer first reported
in January 2006 on the highfailure rate for Charlotte-arealoans arranged by Beazer andinsured by the Federal HousingAdministration.
In response, the federalgovernment reviewed asample of loans arranged byBeazer’s local office. This wascompleted in February 2006,but the Department ofHousing and UrbanDevelopment, whichadministers the FHA program,refused to release its findingsuntil last December.
The review found thatBeazer in at least two caseshad failed to document thatborrowers could afford theirmortgage loans, a violation ofFHA rules. One of thoseborrowers has sinceforeclosed, and the other filedfor bankruptcy to avoidforeclosure, the Observerfound.
The review also found thatBeazer charged at least fiveborrowers in the Charlottearea several times themaximum loan fees allowedon an FHA loan.
The review did not addresshow HUD allowed this tohappen. And the affectedborrowers were not notified.
HUD did request a responsefrom Beazer. But two monthsafter the report wascompleted, in April 2006,Beazer’s Charlotte officesurrendered its license tomake FHA loans. HUD said thesurrender was voluntary.Beazer declined to comment.
HUD says it will take nofurther action against Beazer.And the department saidBeazer still can make FHAloans to Charlotte-areaborrowers through a differentlending office.
“We still want people to beserved,” HUD spokesmanLemar Wooley wrote in ane-mail to the Observer.— BINYAMIN APPELBAUM
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BUYDOWNS: From 1997 through 2006, Beazer Homes USA helped with mortgage payments for 64 percent of its FHA borrowers in the Charlotte area. That compares with 20 percent compares with 20 percent of FHHA borrowers in the area
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DOWN PAYMENTS: From 1997 through 2006, Beazer Homes USA provided down payments for 69 percent of its FHA borrowers in the Charlotte area. About
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SOURCE: Observer analy o
WM PITZER - [email protected]
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BEAZER
Read the serieson the Web atCharlotte.com
On Sunday, the Observercharted the problems of theforeclosure-plagued SouthernChase development inCabarrus County.
Beazer Homes USAaggressively sold starterhomes to low-income buyersin ways that made a high rateof foreclosures inevitable, anObserver investigation found.It arranged larger loans thansome buyers could afford.That allowed it to include thecost of financial incentives inthe price of homes.
The strategy was afinancial success for theAtlanta-based home builder.But the neighborhood fellapart. Seventy-seven buyershave lost homes toforeclosure in a subdivision of406 homes. That’s about onein five, more than six timesthe national rate.
On Monday, the paper toldhow the number offoreclosures in MecklenburgCounty has spiked to recordlevels since 2003, almostentirely because offoreclosures in starter-homesubdivisions.
The Observer identified atleast 35 starter-homedevelopments in the countywhere 20 percent or more ofthe homes have foreclosed.
Coming Wednesday
Local, state and federalofficials didn’t track whereforeclosures piled up andcontinued policies thatencouraged starter-homeconstruction.