Homebuyers Allege Inflated Sales; File Suit Against KB Homes, CountryWide

A group of homeowners in West Valley, AZ today filed suit against KB Homes and Countrywide contending the two conspired to inflate the selling price of homes during the peak of the housing market and even as prices began to decline. According to one article, the 7 plantiffs are claiming customers lost billions and the scheme contributed to increased foreclosures and defaults.

The suit focuses on 2 states and traces activities back to 2006. According to the National Law Journal, plantiffs are “alleging Los Angeles-based KB Home steered home buyers to Countrywide, which then steered them to LandSafe Appraisal Services, a wholly owned subsidiary of Countrywide. LandSafe then used appraisers who would arrive at inflated values by selecting properties that weren’t comparable, relying on pending sales instead of completed sales, and using false statements about the housing markets in Arizona and Nevada, the suit alleges.”

This is the second case filed against Countrywide this year. Both suits were brought by Hagens Berman Sobol Shapiro, which is located in Seattle, WA.

  1. Barring any alleged conspiracy, it’s simply supply and demand. People bought at the increased prices which creates market value.

  2. Ramrcdk

    Don’t you just LOVE the use of Appraisal Management Companies (Landsafe) owned by Lenders (Countrywide)..really a separate “Third Party”! All BIG Banks OWN their own AMCs. What a joke! I hope this is only the beginning of the fallout of the resultant government “Code of Conduct” that became mandatory May 1st. The HVCC did nothing but lessen an appraiser’s independence! Mandatory 24-48 hour turn time, AMCs charge back their service fee to the appraiser resulting in working twice as hard for half as much. Ethical…I do mean ethical appraisers may not always be able to provide a diligent service in 24 hours! Do Borrowers know that their…lets say $450 appraisal fee would cost less IF the AMC was left out of the ordering system? Sooooo broken! That’s again BIG Government for hurrying the HVCC and further adversely affecting the mortgage crisis! Will there be any Ethical, Diligent, Independent Appraisers left? Or will Lenders just use Tax Value for the loan? Largely, Creative Financing got us into this mess and do you really think a Bank Owned AMC is gonna get us out?

  3. Tim

    No surprises here…..I wonder how long it will be before Hans, Berg, & Co will file in several other states. This was “business as usual” for years in many places. Manipulation of the title and valuation services by lenders must come to a stop. Manipulation by lenders can result in both “inflated” and “deflated” valuations. I wonder if the current cycle of manipulation is more the later.

  4. Dedra Topham

    There is no such place as west valley, AZ. The west valley is a geographic area that encompasses a group of cities.

  5. David

    Word finally seems to be slipping out that “HVCC Sucks”.
    Appraisers and mortgage brokers (the primary targets) have been trying to convince Congress of this for over a year with no success.
    Realtors and the American public are now starting to awaken to the fact that they are the secondary targets (victims?).
    During the past 2 weeks CNBC issued a story called HVCC/Fix Or Fraud.
    Kenneth Harney released an excellent followup story in the Washington Post today on the injustice of HVCC. The article is called New Appraisal Rules Costing More
    Susan Martin has written an excellent story in the St. Petersburg Times entitled:
    Bad Appraisals Hurting Sales And Costing Consumers
    Will the American public put up with this or will they force Congress to explain precisely how HVCC is providing them with protection that justifies legalized racketeering on the part of the U.S. government.
    Congress has always stood behind the banking industry for obvious reasons. The fact is though that they are now being held accountable to discipline banks that became too greedy.
    HVCC is providing banks with billions of dollars in profits at the expense of an innocent victim (the appraiser). It was forced upon the American public as yet another act of banker greed.
    Congress must hold banks accountable. How again is HVCC in the best interest of anyone other than the banks?

  6. Kev S.

    lol. insightful and think of what I said about HVCC

  7. Tim

    Sad thing is this practice continues. Every builder has a “preferred” mortgage company that also will offer concessions and contributions when you use them for financing. The on site sales people make sure you know that because they get paid a little extra “spiff” for securing the financing. This last month I did three new construction inventory purchase assignments. Three different builders and each had their “own” mortgage company. When I researched it I found that each one of those mortgage companies was a subsidary of COUNTRYWIDE.
    The on site sales person told me thay were surprised to see a different appraiser as usually they always get the same guy from the AMC !
    I probably won’t be back again as I had to adjust for seller concessions which resulted in value under contract. No phone calls, no hassle but I expect they just switched financing programs and proceeded once the “good appraiser” got the redo assignment.

  8. rvw

    Realtors are victims? Wow. So fingers have been pointed in every direction and NOT ONE rep from any realty association has acknowledged their part in the current state of affairs. Wow… The NAR should be at the front of the line admitting that the practices of the association violate reasonable trust.
    Consumers drive the market as has been mentioned on this blog several times. I hope the association remembers that when it loses previously held power due to irresponsible practices and an inability to own up to its mistakes.
    Lead. Period.

  9. As an Appraiser/Realtor in SW Florida, I can confirm that Lansafe and others were advocating pending sales be used. I was shocked the first time I was told to use “ACTIVE LISTINGS”. The reason being, prices were going up weekly and the contract prices were always at the next level. I objected then and also observed the escalation in prices become even more absurd. That little item which is mentioned in a post here, opened up yet another can of worms. Appraisers, new in the business didn’t understand the problem. The oldtimers did.
    Landsafe and Rels both placed me at the bottom of their call list for refusing to participate in dirty deals. Both are owned by banks. Imagine that.