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Homeowners Claim KB Home, Countrywide, LandSafe Rigged Appraisals

A group of homeowners filed a class-action lawsuit on Thursday against ""KB Home"":http://www.kbhome.com, ""Countrywide Financial"":http://www.countrywide.com, and the bank's affiliated ""LandSafe"":http://www.landsafe.com/ appraisal services, claiming the three ""conspired to systematically, artificially, and illegally rig home appraisals ... to boost home values and sales prices.""
The suit, filed in U.S. District Court in Arizona, claims KB and the other defendants inflated home prices by as much as $2.8 billion in Arizona and Nevada during a three-year period.
Rob Carey, an attorney with the law firm of ""Hagens Berman Sobol Shapiro"":http://www.hbsslaw.com/ (HBSS), representing the plaintiffs, claims that KB routed purchasers to Countrywide for loan services, often claiming they would act as a loan broker, representing the purchasers' interests in finding the best loan package available.
Carey said though, ""In reality, Countrywide and KB were in cahoots, intent on sticking the homeowner with an inflated home appraisal to justify the purchase price.""
According to the 50-page complaint, Countrywide funneled all its KB customers' home appraisals to one person at its appraisal subsidiary LandSafe, who in turn, would deliver an appraisal value at whatever KB and Countrywide ordered. In two KB Home developments cited in the complaint, sampled appraisals were inflated by $82,169 per property on average.
Carey said, ""Even if we used a more conservative $20,000 per property, this alleged scheme would add $2.8 billion in ill-gotten profits in KB's pockets. Those profits come at the expense of the homeowner, who moves into a house already upside-down, and the secondary market, buying tainted investments.""
The complaint sites instances of appraisals that used pending sales within the same development as comparable properties substantiating appraisal values.
Steve Berman, managing partner at HBSS, commented, ""This boils down to nothing more than a Madoff-like Ponzi scheme. KB relied on the initial use of false appraisals to push early sales in KB Home developments - these inflated purchase figures were then used to continue propping up the value and selling activity of KB homes across entire communities and states.""
Berman noted that appraisers would not have access to pending-sales numbers unless KB Home supplied those values.
According to the suit, homeowners learned they had been duped when they attempted to sell their homes and hired independent appraisers.
The suit details the tactics used by the LandSafe appraiser to deliver the predetermined value as blatantly falsifying sale prices for comparable properties, using comparable properties that were as much as 10 miles away, and citing comparable properties that were in other planned communities.
According to Berman, his firm filed a proposed class-action suit against Countrywide and KB earlier in the year. That suit has been recast as an ""individual action against the defendants"":http://www.hbsslaw.com/kbhomes.
Berman said, ""Since we filed our first suit, we've learned a great deal about KB and Countrywide's actions. We believe it will help us illustrate what we see as a cynical scheme condoned and encouraged by the organization's leadership.""
The HBSS lawsuit claims violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and violation of California unfair competition law, and represents anyone in Arizona and Nevada who purchased a home from KB Home and financed through Countrywide.
A spokesperson from KB Home said the company believes ""these allegations are completely without merit."" No one from LandSafe was immediately available for comment at the time of publication.