KB Home, Countrywide Accused of $2.8B Fraud
The lawsuit, filed in federal court in Phoenix, claims the three companies colluded to overprice as many as 14,000 homes in the two states by an average of $20,000, for an estimated total of $2.8 billion between 2006 and the present. The plaintiffs seek class action status and triple damages.
A KB Home spokeswoman said the Los Angeles-based home builder had not seen the lawsuit and had no comment. Calabasas, California-based Countrywide, which was acquired last year by Bank of America, could not be reached for comment.
The lawsuit contends that KB and Countrywide formed the joint venture Countrywide KB Home Loans to “rig and falsify” appraised values of the homes they were selling and financing in the two states.
The joint venture steered prospective buyers of KB Homes to hand-picked appraisers at Countrywide subsidiary LandSafe who would “come in with the appraisal at whatever number was necessary to close the deal,” the lawsuit said.
LandSafe appraisers “blatantly falsified” sales prices for comparable properties, using prices from homes as much as 10 miles away, and citing comparable properties that were in different planned communities, the suit said.
The homes were generally priced between $250,000 and $350,000 — inflated sums that homeowners discovered when they attempted to sell their homes and hired independent appraisers, said plaintiffs attorney Steve Berman of Hagens Berman Sobol Shapiro LLP in Seattle.
“Most of these people were underwater from the get-go,” said Berman.
The Hagens firm filed a similar lawsuit against KB and Countrywide earlier this year in California, citing claims under the Racketeer Influenced and Corrupt Organizations Act and violation of the state’s unfair competition law.
The case is Nathaniel Johnson v. KB Home et al., 2:09-CV-00972-MHB, in U.S. District Court in Arizona. (Reporting by Gina Keating; Editing by Tim Dobbyn)