Los Angeles, Nov. 13 — A Texas homeowner filed a class-action lawsuit today against KB Home (NYSE:KBH), Countrywide Financial and LandSafe Appraisal Services, claiming the three conspired to rig housing prices in Texas and Colorado, costing home purchasers millions of dollars and pushing homeowners into dangerous loans.
The suit, filed yesterday in U.S. District Court in Los Angeles, claims the three companies employed a well-planned scheme to control the typically independent appraisal process, jacking up home values, which, in turn, were used to determine the value of other homes sold by KB, affecting thousands of homeowners.
The suit claims KB Home targeted homeowners throughout Texas and Colorado with the scheme. The complaint states between 2006 and 2008 more than 19,000 homes were delivered to the area. At an average price of $167,533 a home, and conservatively assuming an average inflated appraisal of $20,000 per home, that amounts to almost $300 million in inflated contract prices, the suit states.
The homebuilder has a significant presence in Texas with 17 communities in the Austin area, 10 communities in the Dallas area, 16 communities around San Antonio and 24 communities in Houston, the suit states.
This is the fourth lawsuit Hagens Berman Sobol Shapiro (HBSS) has filed against KB Home, Countrywide and LandSafe alleging a national inflation scheme to defraud consumers. The other lawsuits represent homeowners in California, Arizona, Nevada, Florida, North Carolina and South Carolina.
"The lawsuit representing Texas and Colorado homeowners mirrors the others suits we've filed across the country," said Steve Berman, managing partner at Hagens Berman Sobol Shapiro. "These three created a systemic and tightly controlled process to inflate home values and home sales with no regard for the homeowners or the dangerous loans the companies pushed on unsuspecting purchasers."
According to the complaint, Countrywide funneled all its KB customers' home appraisals to a single person at LandSafe, an appraisal subsidiary of Countrywide, who in turn would deliver an appraisal value at whatever KB and Countrywide ordered.
The named plaintiff, Alice Stacy, purchased her home in 2006, and initially signed a purchase agreement for $150,484. An initial appraisal submitted to Countrywide-KB mistakenly put the home's value at $142,000 - this included a $14,000 sales incentive and rolled in the closing costs of the home that totaled $5,516, the suit states.
The appraiser mistakenly thought KB wanted to sell the home at $142,000, a number too low to support the loans KB and Countrywide decided to foist on Stacy. It was also too low to support the sales pitch KB delivered to Stacy, claiming the home's value was $150,500.
The plaintiff obtained a report of the lower appraisal, contacted KB and demanded a lower contract price, and the company told her the appraisal was a mistake. KB insisted the house was in fact worth $150,500 and they would fix it, the suit states.
A few days later, the same appraiser submitted a revised appraisal showing an increased value on the home, exactly the level that KB promised Stacy.
"With this case, Alice called KB out and pretty much caught them red handed inflating values after the appraiser mistakenly issued the lower report," said Berman. "The correction and inflation of the value speaks volumes to the practices we've alleged in all our complaints, that KB's demanding specific home values and LandSafe is delivering without question."
The lawsuit lists several claims against the defendants including violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), violation of California unfair competition law and unjust enrichment.
Links:
[1] http://www.hbsslaw.com
