Six builders will pay $1.4 million in HUD settlement
The United States Department of Housing and Urban Development (HUD) has announced a settlement agreement with six major U.S. home builders — KB Home, Beazer Homes, Technical Olympic USA, Pulte Homes, Meritage Homes and Ryland Group.
The six home builders will pay a combined $1.4 million for violations of the Federal Real Estate Settlement Procedures Act. Payouts range from $466,000 from Pulte Homes to $52,000 by Technical Olympic USA.
HUD said the home builders used the “complex business practice” of issuing their own “captive” title insurance to homeowners, an “unnecessary” step in single-family home buying, the agency said.
HUD describes captive title reinsurance as “a practice whereby a title insurance company transfers a portion of the risk and title premium to a company owned by the builder, lender or real estate broker referring business to the title insurance company.”
“It’s increasingly clear to us that these complicated business arrangements serve no other purpose than to hide referral fees and kickbacks, which are expressly forbidden by law,” said Brian Montgomery, federal housing commissioner.
Additional settlements stemming from the insurance arrangements have, in the past year, totaled $4.95 million, according to HUD.
Pope & Talbot files for bankruptcy in Canada
Lumber producer Pope & Talbot has filed for bankruptcy protection in Canada, according to a company filing with the Securities and Exchange Commission.
The company cited a stronger Canadian dollar, coupled with “record low demand for lumber” as leading to the company’s need for protection from creditors.
In its second quarter, Pope & Talbot reported a loss of US$42.9 million compared with losses of US$21.8 million in the same period last year. Sales were US$236.6 million, up from sales of US$213.6 million last year. The company ended the second quarter with US$354.9 million in debt, and its shares were delisted from the New York Stock Exchange in August.
The company also said “high-priced pulp chips and sawdust” and “the high cost of debt service have combined for an untenable business environment.” If the company’s bankruptcy filing is approved, it will begin a restructuring process that could include “the sale of certain or all of the company’s assets.”
Based in Portland, Ore., Pope & Talbot produces market pulp and softwood lumber at mills in the United States and Canada.
M/I Homes sees losses of $21.7 million
Columbus, Ohio-based home builder M/I Homes saw a third-quarter net loss of $21.7 million, swinging from earnings of $15.2 million in the same period last year. Net revenue fell 20.4 percent to $243.7 million from $306.2 million last year.
The loss includes a $26.5 million charge for land and real estate-related impairment and abandonment, as well as a joint venture investment write-off of $6.1 million. Year-to-date the company has recorded $92.9 million in land-related charges.
Robert Schottenstein, president and CEO, said market conditions remain challenging in the company’s markets.
“We remain focused on initiatives that include reducing our land and expense levels, improving our balance sheet, as well as continued improvements in our customer service and quality processes,” Scottenstein said. “We expect to … further reduce our debt levels by year end.”
M/I Homes builds homes in Ohio, Illinois, Indiana, Florida, North Carolina, Delaware, Virginia and Maryland.