Mark and Lea Tingley bought a new home in 2001 in a subdivision called Southern Chase. Photos on the family computer show a smiling young couple holding a baby girl in a bare room.
They recall feeling surprised they could afford a house. And thrilled. It was their first home, their largest investment, in the neighborhood where they planned to raise a family.
Beazer Homes USA built the Tingleys' home. Southern Chase was a new kind of subdivision for Beazer, an experiment in selling low-cost homes to low-income families.
The strategy was a financial success for Beazer.
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But the neighborhood fell apart.
Seventy-seven buyers have lost homes to foreclosure in a subdivision of 406 homes. That's about one in five, more than six times the national rate.
Some homes sat empty. Others became rentals. Prices dropped.
Standing in his side yard last fall, Mark Tingley pointed to holes in his siding, garbage in neighboring yards, overgrown lawns, junked cars. He feels angry, cheated and trapped.
"We were just so happy," he said. "Now, no one is happy."
The buyers in Southern Chase share responsibility for the decisions they made.
But an Observer investigation found Beazer acted in ways that made a high rate of foreclosures inevitable. Beazer not only built the homes in Southern Chase, it arranged mortgage loans for two-thirds of the buyers. The company used that control to arrange larger loans than some buyers could afford. That allowed it to include the cost of financial incentives in the price of homes.
Some of Beazer's actions violated federal lending rules, the Observer found.
Beazer said its practices in Southern Chase were "in strict compliance with federal, state and local laws and regulations." The company said in a written statement that the foreclosures were mostly due to economic difficulties experienced by the buyers.
"Beazer is committed to providing quality homes of superior value," the letter read in part.
The company's CEO, Ian McCarthy, declined to speak with the Observer.
The Federal Housing Administration, which insured most of the mortgage loans, failed to address the problems. The government has paid more than $5 million to cover defaulted loans in Southern Chase. It continues to insure new Beazer loans.
The Department of Housing and Urban Development, which administers the FHA program, told the Observer it was not aware of the problems in Southern Chase and did not plan to investigate the loans it insured for buyers there.
Demand `hot as a match'
The night before Southern Chase opened in 1997, people camped outside the sales office, waiting to pick the best lots.Home prices started below $80,000, roughly half the Charlotte-area average. Demand was "hot as a match," said Barry Helms, the sales agent who greeted them. He remembers selling six or seven homes the first day.
The unusually low prices were a strategic decision for Beazer. Too many companies were building homes in the Charlotte area for traditional first-time owners, the company said in its 1997 annual report. Beazer's answer was to build and sell homes for less.
Beazer also was responding to opportunity. The federal government was pushing to expand home ownership. It was encouraging mortgage lenders to relax standards, to make loans available to many lower-income families for the first time. The FHA offered to insure the loans: If the borrower didn't pay, the government would.
Beazer, which operated in the Carolinas at the time as Squires Homes, chose a site off N.C. 49 in Concord, where land was still relatively cheap.
The subdivision is 15 minutes from Lowe's Motor Speedway, so Beazer gave racing names to the streets: Winners Circle, Rockingham Lane. It built vinyl-sided homes on small lots, mostly one story, an average of 1,327 square feet.
Contractors did the building. Beazer focused on marketing. It held pizza parties at nearby apartment complexes. It took tenants to see homes.
"We believe in the dream," read a Beazer flier distributed to apartments in Concord. "We believe that everyone deserves to own their own home."
But as the company pushed to find new buyers, it increasingly crossed the line between selling to people who could barely afford homes, and selling to people who couldn't.
Lea and Mark Tingley were not looking to buy a home in early 2001. They had little savings.
Lea made $11 an hour weighing trucks at a Martin Marietta rock quarry. Mark made a little less as a forklift operator at a building supply store.
They heard about Southern Chase from Lea's brother, who had just put a deposit on a home there. If he could afford a house, Lea recalls thinking, I can, too. The Tingleys drove out the next day from their Concord apartment.
They say the sales agent told them Beazer would arrange the down payment. The company also would arrange a mortgage. It would even help with the monthly payments for the first two years.
Lea remembers the sales agent saying, Let's just do this. You're pregnant. You need a home of your own.
She returned the next day with a $600 deposit.
The company spent about $9,000 on financial incentives for the Tingleys, including the down payment, most of the closing costs and help with the mortgage payments. The company offered similar financial incentives to most buyers from 2001 to the end of sales in 2004.
As Beazer's costs rose, the company raised the price of new homes in Southern Chase by an average of 10 percent per square foot between 2000 and 2002. That was twice the price increase for similar homes elsewhere in Cabarrus County.
The model the Tingleys purchased, the Talladega, had a base price of $96,490 on a 1999 price sheet. By 2001, Beazer had raised the base price for the same model with the same square footage to $108,990.
Buyers needed larger loans to pay the higher prices. Beazer arranged the loans through a subsidiary, Beazer Mortgage, which acted as a mortgage broker, matching customers with lenders for a fee of several thousand dollars. From 2001, Beazer Mortgage arranged loans for 84 percent of the buyers in Southern Chase.
Almost all of the loans were insured by the Federal Housing Administration. That meant Beazer and the lender had little to lose if the borrower could not afford the loan.
Beazer assured borrowers it was acting in their interest.
One buyer saved a brochure from Beazer's mortgage business that reads in part, "There are no salespeople in this office. The people you work with are working for you, to secure the best possible deal on your behalf."
Costly loan maneuvers
The Tingleys moved into their new home in April 2001. Lea cleared out her 401(k) to pay $2,500 toward closing costs.The keys came in a manila envelope with instructions on the front:
"1) Dump on table.
2) Place key on ring.
3) Do the `Happy Dance' (Jump up and down shouting wildly.)"
The thrill did not last.
Lea had applied for the loan without Mark because he had credit problems.
She omitted from her application a monthly payment of $350 on a leased Dodge Avenger.
Lea said a Beazer employee told her to do it because the application also didn't include Mark's income.
"At the time it made sense to me and I was just excited about owning the home," Lea said. She says she knows she shouldn't have omitted the payment, but she trusted the employee.
Loan documents show that Beazer Mortgage prepared a final version of Lea's application before the closing. On that final version, Lea's monthly income was overstated by $187. It had been correct on the original application Lea signed. It is unclear when the number changed.
FHA rules required Beazer to document the borrower's income and debts. Lea's credit report and W-2 show the accurate numbers.
Knowingly falsifying information on a loan application is a federal crime.
Lea says she didn't notice the change until the Observer pointed it out this fall.
The company did not respond to The Observer's written questions about the loan.
The changes allowed Lea to qualify for the loan she needed.
But in the summer of 2001, three months after buying the home, Lea called the dealership and asked to have the Avenger repossessed. She could not afford the car and the mortgage.
Buydown balloon inflates
The Tingleys' monthly mortgage payments started low because Beazer had agreed to pay part of the bill for two years. The company arranged similar deals, called interest-rate buydowns, for 146 other buyers in Southern Chase.
Under FHA rules at that time, paying part of the loan allowed Beazer to arrange larger loans than buyers could otherwise get. But Beazer had to document that buyers likely would have enough money to make the full payment by the third year. The Tingleys say they were never asked.
Other buydown recipients in Southern Chase included a clerk in an accounting office, a nursing home assistant and a trash collector. There was little chance their income would increase sufficiently. They also say they were never asked.
In June 2002, the Tingleys' monthly mortgage payment climbed from $675 to $744. Their income did not keep pace. Mark had quit work to care for the couple's daughter. They were unable to pay the full amount.
One year later, the monthly payment went up again, to $856, and the Tingleys fell further behind.
The bank that made the loan, National City, let them keep the home -- but only if they made larger payments to catch up.
They sold their furniture and replaced it with furniture from Goodwill. They sold gold coins given to Lea by her father. They ate Oodles of Noodles and lots of peanut butter.
They held on. Many of their neighbors did not.
2004 was the first year in which many buyers were making a full mortgage payment without Beazer's help.
The overwhelmed owners might have sold their homes to pay their debts. But prices in the neighborhood had dropped.
Too many homes were for sale. Foreclosed homes were available for 80 cents on the dollar. There were newer subdivisions nearby.
Many remaining residents owed more than they could sell their homes for, and they lacked the savings to pay the difference.
Martin and Jill Higginbotham tried to sell their home for two years after Martin took a job in Tennessee. Finally, Martin mailed in the keys and called the lender.
"Do what you have to do," he remembers saying.
The lender foreclosed in early 2004. Twenty-nine other owners lost their homes that year.
Mark Tingley took a part-time job. An auction house paid him to tend three foreclosed homes once occupied by his neighbors.
Can't afford to stay or go
The Tingleys had a plan when they moved to Southern Chase. They would sell after five years and move to a larger home.
By last fall, their daughter was 5, their son was 3 and the 1,410-square-foot house felt small. But the Tingleys owed more than $115,000 on a house valued for tax purposes at less than $108,000.
They talked with real estate agents, who quoted even lower prices.
The Tingleys were struggling to pay their mortgage. The monthly bill had climbed to $1,091, including catch-up payments. They didn't have the savings to sell the home at a loss.
"We can't afford it, we can't sell it and we're hurting ourselves just trying to keep it," Lea said.
Her credit has become so bad she said she can't open a bank account.
She and Mark worry they will lose the home the next time they fall behind on the mortgage payments.
They worry the home is falling apart: There is mold in the carpet where it meets the walls. Vinyl siding is cracking and popping. Wooden trim is rotting.
They could walk away and accept foreclosure.
But they say they're not ready.
They worry most of all that this will be the last home they ever own.