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Michael Eyerly
Michael Eyerly
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HOME BUILDER AND COUNTRYWIDE ACCUSED OF CONSPIRACY TO DEFRAUD CONSUMERS

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As if the news about the housing industry wasn’t bad enough already. What with stagnant home sales, plummeting home prices and the so called “sub-prime mortgage meltdown” there are plenty of things about which to worry. Now comes news of an alleged scheme carried out by KB Home and Countrywide Financial to defraud consumers.

Here is what a newly filed class action lawsuit alleges – KB Homes and Countrywide conspired to produce phony appraisals to sell homes at higher prices. Exaggerated (or fraudulent) home appraisals played a role in the housing price run up earlier this decade and contributed the collapse we are seeing now. The new class suit alleges that Los Angeles based home builder KB Homes and a unit of mortgage lender Countrywide Financial Corp. produced falsely pumped up appraisal reports so new homes could be sold at prices higher than the homes were truly worth. This, of course, means that consumers would therefore have to take on bigger home loans to buy these overpriced homes. Plaintiffs allege that KB Home and Countrywide “conspired with affiliate appraisers to generate fraudulent” appraisal reports. The suit contends that appraisers did this by comparing home sales prices for home in other KB Home developments rather than looking at actual comparable homes in actual comparable neighboring areas.

At base, the lawsuit contends that KB Homes knew housing prices were going down, but the company didn’t want to truth to cut into its profits so the company rigged the appraisal process. The lesson for consumers is unfortunately a common refrain – you just can’t trust anyone. So, do your own due diligence. Hire independent professionals to help ensure you get what you pay for and who can help make sure you don’t pay more than you should.