Pulte Homes faces lawsuit; REAL ESTATE

Carolyn Said, Chronicle Staff Writer

A California homeowner filed a class-action suit against Pulte Homes on Friday alleging that the nation's largest home builder fraudulently propped up home prices and sales in a "house of cards" scheme that eventually caused values in its developments to plunge.

The lawsuit, filed in U.S. District Court in Northern California, alleges that Pulte's "one-stop shopping" business model, in which it controlled sales, financing, settlement services and appraisals, allowed it to sell homes at inflated prices and give buyers mortgages they could not afford.

Since Pulte Mortgage, Pulte's financing subsidiary, quickly sold its loans on Wall Street, it was not affected when buyers defaulted, the suit said.

"Pulte Homes believes the allegations are without merit and we will vigorously defend the case," said Jacque Petroulakis, a spokeswoman for the Michigan company, which has more than a dozen developments in the Bay Area.

Steve Berman, lead attorney in the case and managing partner of Seattle law firm Hagens Berman Sobol Shapiro, said that some of Pulte's developments became "toxic subdivisions with foreclosure signs all over the place, homes not taken care of, and no chance that the prices will go back up."

Berman said Pulte lured unqualified buyers - such as the case's named plaintiff, Sodalin Kaing, who earns $21 an hour but bought a house for $518,215 - with the promise of large discounts if they used Pulte Mortgage. Kaing bought a home in the Pulte Aerial of Mossdale development in Lathrop San Joaquin County.

By operating within a closed loop where it controlled all aspects of the transition, Pulte "created an amazing opportunity for itself," Berman said.

The suit is on behalf of anyone who purchased a Pulte home in California from Jan. 1, 2005 through March 1, 2007. Homeowners can learn more at www.hbsslaw.com/pultehomes. Berman said he also expects to expand the case to Pulte developments in Nevada and Arizona.

Berman's firm also has a class-action suit pending against KB Homes and Countrywide Financial, its preferred lender, alleging that they conspired to drive up prices.