July 1 (Bloomberg) -- Beazer Homes USA Inc. agreed to pay as much as $53 million to the government and homeowners to resolve allegations of mortgage fraud, the Justice Department said.

When Beazer’s mortgage unit made federally insured loans for the purchase of homes built by Beazer, they improperly required purchasers to pay discount points and failed to reduce interest rates, the department said in a statement today. Beazer also allegedly provided cash gifts to home purchasers through charities to help customers make down payments, and ignored income requirements in making loans.

Unqualified home buyers obtained federally insured mortgages and interest rates for the loans were inflated, according to the Justice Department. Some of the mortgages that resulted from the fraud defaulted and the Federal Housing Administration was “wrongfully required to pay inflated claims” and to pay for managing and marketing the properties.

“Mortgage fraud is a top priority for this administration, especially when public dollars are at stake,” Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division, said in a statement. “We will aggressively pursue fraud on federal mortgage insurance programs.”

Beazer, based in Atlanta, said in a statement that the company has “fully cooperated” with government investigations. The Justice Department statement said Beazer is paying $5 million to the government and creating a $48 million contingency fund to make further restitution.

Under the settlement, the Justice Department agreed to defer any prosecution of the company if it fulfills the terms of the settlement. The agreement was filed in U.S. District Court in Charlotte, North Carolina.

SEC Action

Also today, the Securities and Exchange Commission sued the former chief accounting officer of Beazer, Michael Rand, in U.S. District Court in Atlanta, alleging he fraudulently managed earnings to meet analysts’ expectations and mislead auditors to conceal the activity.

Beazer, which exited the mortgage business last year, agreed in May to pay $2.5 million to settle an investigation by North Carolina of its home-loan unit. Beazer was accused of fraudulently selling discount points to borrowers.

In May, Beazer said it agreed to pay $30.5 million to settle a class-action lawsuit over allegations it misled shareholders about mortgage-lending practices.

Beazer remained unchanged at $1.83 in New York Stock Exchange composite trading.

To contact the reporter on this story: Justin Blum in Washington at jblum4@bloomberg.net

Last Updated: July 1, 2009 17:37 EDT