The Wall Street Journal-20080202-Credit Crunch- Beazer Quits Cities- Shuts Mortgage Arm

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Credit Crunch: Beazer Quits Cities, Shuts Mortgage Arm

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Beazer Homes USA Inc. is shutting its mortgage-origination operations, becoming the latest home builder to exit the lending business amid the slow housing market and increased scrutiny from federal regulators.

While Beazer may give up revenue with the move, it will also avoid potential future liabilities from the business, which recently has buried it in lawsuits, bad publicity and federal investigations.

The Atlanta-based builder has signed a deal with Countrywide Financial Corp. to market loans to Beazer buyers. "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," Chief Executive Ian McCarthy said in a statement.

Beazer also said it is pulling out of Charlotte, N.C., citing the negative publicity there related to complaints about its lending practices. The builder also announced it is leaving the weak markets of Cincinnati, Dayton and Columbus, Ohio; Columbia, S.C.; and Lexington, Ky.

During the housing boom, builders used internal mortgage companies to generate fees and to offer incentives to boost sales.

"It makes more sense for builders to outsource mortgage origination in some cases to mitigate the risks of liabilities," says Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm.

Beazer rose 6.9%, or 60 cents, to $9.31 in New York Stock Exchange 4 p.m. composite trading.