CLASS ACTION BLOG : Countrywide

Rigged Home Values? – KB Home Lawsuits Expand

Steve Berman — Thu, 18 Jun 2009 16:52:00 GMT

By Steve Berman

Home appraisals are an essential part of the home buying process. An independent appraisal is a safeguard for both the purchaser and the lender – it is an unbiased look at the value of a property.

What happens, though, when you corrupt the process? What if a builder works in cahoots with a mortgage company who, by the way, owns an appraisal service?

If you read our lawsuits against home-building giant KB Home, Countrywide Mortgage and its appraisal subsidiary LandSafe, you will see that consumers – homebuyers – suffer.

For the past several months our firm’s kept a close eye on KB Home, specifically its lending and sales practices, and uncovered what we believe to be widespread fraud in Arizona, Nevada and California. Our suit contends the trio conspired to inflate appraisals, rig home values and allowed their partner, Countrywide to place homeowners in loans they didn’t qualify for and can’t afford.

The suit includes a list of tactics the group used to deliver predetermined appraisal values, including blatantly falsifying sale prices for comparable properties, using comparable properties that were as much as 10 miles away, and citing comparable properties that were in other planned communities.

When homeowners unknowingly overpay for their home they are under water from day one and the ramifications are long lasting and extremely damaging. Many don’t find out the extent of the damage until loan payments become too burdensome or they try to sell and realize they won’t be able to repay the loan through a sale based on an accurate and lower appraisal.

Since the announcement of our cases, we’ve heard from homeowners in these areas – all who are rightfully concerned about their homes and their loans – and the overwhelming response is a feeling of despondency that KB Home and Countrywide, companies they trusted, would so blatantly manipulate them for the sake of a sale.

Recently our firm’s taken on a large number of real estate focused lawsuits as the housing market started to collapse in 2006. This is the second lawsuit involving KB Home and the fourth naming Countrywide and LandSafe.

In the past two years, we’ve all learned a great deal about the distance both individuals and corporations are willing to go for the sake of profits. In our eyes, it’s appalling. These practices hinge on lies, corruption and collusion and ultimately end up hurting many.

KB Home rigged home values and as a result, lawsuits are now expanding into other areas. We believe we’ve just hit the tip of the iceberg with KB and will continue to investigate operations in other markets.

For now, we encourage any KB homeowners out there to share information about these lawsuits with friends and neighbors. We welcome your thoughts and comments here on the blog and encourage you all to visit the case page at www.hbsslaw.com/KBHomes.

As the cases progress and we begin new investigations, we’ll keep you updated.

No ‘Home Sweet Home’ for KB Home Customers

Steve Berman — Wed, 11 Mar 2009 19:41:00 GMT

Former KB Home CEO Bruce Karatz and Martha Stewart don't seem like they have much in common aside from company's partnership that features Martha inspired designs in various KB Home communities.

Unfortunately for Bruce - he may share more in common with Martha in coming days. Similar to the plight of the domestic goddess, the former CEO of KB Home may soon add jail time to his public resume. Karatz faces 415 years of potential jail time after an indictment last week for allegedly obstructing justice and fudging financial statements to the SEC.

To add to the KB Home drama, this week our firm announced an investigation into KB Home on behalf of homeowners. We believe KB Home worked with Countrywide to significantly overcharge customers through inflated appraisals.

We've heard that KB Home had secret agreements with Countrywide Mortgage and its appraiser, LandSafe, to inflate the appraisal value of KB Homes' houses to increase profits for the homebuilder. According to some reports, this alleged scheme caused homeowners to pay inflated home prices, in some cases $50,000 or more than the home's actual value.

In this fragile economy, we think the idea of home and lending companies conspiring behind closed doors is reprehensible. We strongly believe that as advocates for victims of fraud, we must continue to be vigilant, and hold those who prey upon consumers accountable.

Hagens Berman Sobol Shapiro is interested in hearing from homeowners who believe they may have overpaid for their KB Home. Currently KB Home operates in the following states: California, Nevada, Arizona, Colorado, New Mexico, Texas, Louisiana, Florida, Georgia, South Carolina, North Carolina, Illinois and Wisconsin.

If you bought a KB Home and feel that you may have overpaid, we would like to hear your story. You can e-mail your information to kbhomes@hbsslaw.com or click here.

We will update our Web site and blog as the investigation progresses.

The Real Estate Industry’s Fine Art of Deception

Steve Berman — Tue, 20 Jan 2009 21:10:00 GMT

I'm no art expert, but in my limited understanding of Impressionism, the painter traditionally uses short, broken brush strokes to create intensely vivid portraits that are beautiful standing from 20 feet away. From a closer vantage point, that same painting seems more like a crazy mix of random, yet colorful brush strokes, melting together with no particular rhyme or reason.

Like a Monet painting, before the subprime meltdown and financial crisis, home lending appeared powerful and invincible from afar. Homeowners received generous and flexible loans and home sales climbed steadily, as did homeowner's perceived equity.

Fast forward a year, take a few steps closer, and the true colors of the industry begin to separate, unraveling to show the true colors of what we allege is a web of deception concealing fraud and unsavory practices from customers, homeowners and others in the home lending industry.

In the past year, we've filed several lawsuits against title and escrow companies, home lenders and financial institutions. Whether the claim is pushing homeowners into dangerous loans, double charging homebuyers with escrow fees or wrongfully inflating appraisal fees, it all falls in the same bucket - corruption, which damages not only the market, but also individuals and families across the country.

One of the larger alleged schemes we uncovered involves several of the nation's largest title and escrow companies. Over the course of several years, companies like Chicago Title Company, First American Title Insurance, Fidelity National Title Company and Old Republic Title and Escrow have used a captive reconveyance scheme, among others, to take advantage of home purchasers, or those refinancing their homes, our suit claims.

Countrywide's also come under intense scrutiny and legal pressure during the past year. At HBSS alone, we filed four significant cases against the lending giant. Allegations range from predatory lending, illegally blacklisting independent appraisers, ERISA violations with the company's 401(k) plan and significant damage caused to plan participants. The most recent case involves the alleged inflation of appraisal fees.

In a lawsuit filed last week, we contend Countrywide rigged the appraisal process in an attempt to boost profits at the expense of homeowners and third-party appraisers. We believe this scenario played out in cities throughout the country, totaling hundreds of millions of dollars in excess profit for the lending giant.

The unfortunate truth is we don't think this practice ends with Countrywide. In addition to our lawsuits against Countrywide, we're also investigating Wells Fargo and Rels Valuation for the same deceptive practice.

If you purchased or refinanced your home through Countrywide and LandSafe recently, you can join the suit. Or if you want to learn more about our Wells Fargo investigation, you can go to www.hbsslaw.com/WFCappraisals for information.

With record numbers of home foreclosures, companies dissolving and unemployment on the rise, times are tough for most Americans.

The role of private litigation can lend a hand during these arduous times, working towards change that benefits everyone. By changing the corrupt practices of big business, holding CEOs accountable for irresponsible lending and guiding a path for homeowners, there is some good that can come out of all this.

Once the dust settles, perhaps the real estate industry should turn its back on Impressionism and pursue Realism.

The Countrywide Blacklist

Steve Berman — Fri, 17 Oct 2008 00:09:00 GMT

It is hard to conceive that a French philosopher from the 17th century could have an impact on our current housing crisis, but as luck would have it, Charles-Louis de Secondat, baron de La Brède et de Montesquieu may have played a roll.

More precisely, had Countrywide Mortgage CEO Angelo Mozilo spent some time reading his political history, and abiding by Chuck's thinking, we might have avoided our current donnybrook.

Montesquieu introduced the concept of checks and balances, originally focused on the political application. His contention, in a nutshell, was that a good system had inherent, opposing forces that could snap into play when one side of the political equilibrium became too dominant.

What he had in mind for government also worked in business, in this case, real estate.

The deal went like this - a home purchaser went to a bank or mortgage broker and asked for a loan. The lender, in turn, went to an appraiser to do an independent evaluation of the home's worth, to make sure there was enough equity out there to support the loan. If the purchaser wanted to borrow $1 million to buy a house worth $1 million, the appraiser would give the deal a thumbs-up. If the house was only worth $500,000, that report would tell the lender it was a dog of a deal and the lender would deny the application.

Checks and Balances.

But what happens if the lender wants appraisers to ignore their responsibility to create accurate appraisals?

Check out this article in the Seattle Post-Intelligencer by Aubrey Cohen, a very sharp real-estate reporter.

In the article, Cohen outlines a lawsuit we filed against Countrywide on behalf of a group of appraisers who claim the mortgage lender used its influence to blacklist them after they refused gin up appraisals in line with the company's business objectives.

Our suit claims that Countrywide's practice was to seek out appraisals that supported loaning money to purchasers even if the deals didn't pencil out, simply so they could make its cut on the loan deal. We further contend that Countrywide and other lenders packaged these jack-legged loans and sold them to other investors.

Our clients contend that when they refused to play ball with this scheme, they were placed on what amounted to a blacklist, known as the ‘Field Review List,' its inside blacklist, which is used to snub appraisers.

We believe that as of Aug. 2008, more than 2,000 honest appraisers appeared on the Countrywide blacklist and that Countrywide has been using the practice for more than four years.

Countrywide tried to jump around these claims by saying blacklisted companies can still submit appraisals. However, in order to do so, individuals on the Field Review List have to file their report with an ‘approved' appraiser, effectively hamstringing them.

We've already filed three lawsuits against the company citing an array of alleged violations and corruption within the ranks. We'll keep you updated on this case and others against Countrywide. Our other suits against the company cite ERISA violations, predatory lending practices and violations of the RICO act that directly affect appraisers.

Please check our blog and Web site for more updates on this case.

Atoning for Economic Sins

Steve Berman — Fri, 10 Oct 2008 18:39:00 GMT

Yesterday was the Jewish holiday Yom Kippur. For observant Jews, it is a very solemn day - one dedicated to repentance and atonement. During Yom Kippur, tradition holds that Jews amend their behavior and seek forgiveness for wrongs done against fellow man and the Creator, providing an opportunity to step back and look beyond the myopic "all-about-me" view.

In the bright light of this new day, though, concerns turn from moral redemption to the hardscrabble reality of an economy in freefall.

Today, working Americans are looking at the smoldering embers of their retirement funds and 401(k)s wondering if -- even after years of planning and saving -- they will be able to afford college for their children. Even worse, retirees are watching the value of their life-savings wither, making them wonder if they will have enough money to last them through the end.

For example, I think Angelo Mozilo, CEO of Countrywide, should take some time to reflect on his role in this situation. We represent a group of consumers who say that Mozilo and his organization intentionally tricked home purchasers into buying mortgages the company knew were ill-fitting. We contend that they lied to consumers about the true costs of the loans, and the volatility of the loans' interest rates. It is our belief that Mozilo's organization put these consumers - and the economy - at risk in exchange for a quick ill-gotten profit.

I think there is some room for atonement there.

And what about Seattle's own Kerry Killinger, former CEO of Washington Mutual. I can look out my window, and see the brand-spanking-new headquarters of WaMu, a building that until recently was the workplace of thousands of our friends, neighbors and colleagues. Earlier this year, the Thrift failed and all those jobs are now in question. We are representing shareholders in WaMu who contend that Killinger's organization intentionally inflated housing appraisals so the bank could make higher loans to consumers, knowing full well the underlying collateral did not exist. Of course, this house of cards came tumbling down, as did the company's stock price.

I think Mr. Killinger might find some solace in atonement.

Where will this all end? I don't know, but I hope Wall Street recognizes that inherent in atonement is a commitment to mend one's ways. We can all say "amen" to that.

Sub-prime Lending: Homeowners v. Countrywide

Steve Berman — Fri, 15 Aug 2008 15:43:00 GMT

Home-ownership is part of the American dream but after hearing from some upset Countrywide borrowers, many say it is turning into more of a nightmare.

We have been hearing from many Washington state residents that used Countrywide, and they are telling us stories that we think cross the line and violate Washington Consumer Protection laws. So much, in fact, that we recently filed a lawsuit on behalf of these homeowners.

Among other charges we included in the complaint are instances in which we believe home purchasers qualified for low-interest loans, but instead were sold much higher-interest loans. This, of course, costs borrowers much, much more, and in some cases we believe made the difference, tipping some into foreclosure.

Our suit also claims that Countrywide did little to explain the risks of some loans, including adjustable rate mortgages (ARMs). We heard, and contend in our suit, that Countrywide's intention was to move highly-lucrative ARMs and other types of loans in an effort to raise company profits.

The plaintiffs we named in the suit - which if approved by the court will represent all the state's residents with similar situations - tell of Countrywide misleading them by not providing documentation that accurately spelled out the terms, misleading them with assurances of inaccuracies regarding interest rates and all sorts of other skullduggery.

Want to see a statistic that made us do a double-take? A recent statement from Countrywide says that a typical borrower owes 20 percent more on their home than when the home loan started. How's that for a telling statistic.

For more on this case please visit our Web site and come back to this blog for updates.