Home-buyers filed suit last month against KB Home in federal court in Phoenix, Arizona, claiming the builder conspired with Countrywide Financial to inflate appraisals for home sales in Arizona and Nevada. The class-action suit focuses on home sales in the two states since 2006. It’s alleged that Los Angeles-based KB Home steered home buyers to Countrywide, which in turn steered them to LandSafe Appraisal Services, a wholly-owned subsidiary of Countrywide. LandSafe then used appraisers who would “come in at whatever number was necessary to close the deal at the price desired by Countrywide-KB,” according to allegations in the lawsuit.
It appears from the complaint that appraisers 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. If that is true, then revenues for KB Home and Countrywide would have been increased at a time when actual values were falling.
The impact of this scheme, according to the lawsuit, is staggering. The lawsuit was filed by the Seattle-based law firm Hagens Berman Sobol Shapiro on behalf of several Buckeye and Surprise residents who bought homes from KB in 2006. It’s alleged that the average appraisal was inflated by $20,000 for the more than 14,000 homes built in Arizona and Nevada. The suit – if a class is certified – will include any person who purchased a KB home in Arizona and Nevada since 2006 and used Countrywide as the lender.
Countrywide, now owned by Bank of America Corp., once the biggest U.S. mortgage lender, settled a multi-state lawsuit in October that alleged it used deceptive practices in its mortgage-lending business. The lawsuit claims the inflated appraisals contributed to the collapse of the secondary market for loans.
Source: Arizona Daily Star
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