Countywide, Landsafe and KB Homes Named in Appraisal Scheme Lawsuits

A lawsuit that was filed on October 30th, in the U.S. District Court of Florida, has named both Countrywide, including its subsidiary Landsafe,  and KB Homes as defendants in a class action suit.  The suit details “alleged predatory practices in an attempt to dominate mortgage lending and corrupt the loan underwriting and approval process”.

Two different schemes are mentioned, inflated appraisals and inflated appraisal fees.

Scheme #1 – Inflated Appraisals

In this first scheme, Countrywide and Landsafe, which is an appraisal  management company owned by Countrywide, inflated the value of KB Homes so the values would always be equal to or more than the contracted sales price of the properties.

Scheme #2 – Inflated Appraisal Fee

Countrywide and Landsafe worked together to receive fees from appraisers for a set price and would then turn around and charge the buyers sometimes up to double the cost of the original appraisal.

Countrywide requires that the property be appraised through its subsidiary, Landsafe.

Landsafe hires out to individual appraisers willing to meet their demands.

Both companies reap the benefits, as they both come from a single parent company, and values can be influenced.

If appraisers did not adhere to the demands of countrywide regarding value “matching”, the appraiser would be black-listed from performing any other Countrywide loans

Landsafe dictates appraisal fees to the appraisers, which the independent appraisers agree to.

When the consumer sees the final cost breakdown, the appraisal fees are highly inflated, sometimes at almost double the cost of the actual appraisal.

For Landsafe’s accounting purposes, there is no breakdown of fees listed.  It only states the appraiser fee and then “a fee for no services rendered”.

In order to conceal the scheme, appraisers are ordered by Landsafe and/or Countrywide not to include any paperwork, including invoices, with the submitted appraisal indicating the fee charged for the services rendered.  In this way, it stops the paper trail and further conceals the scheme from outsiders.

Why does the scheme work?  

1. There is no one to question Countrywide and Landsafe, as they are owned by the same company. 
2. There is no communication between the consumer and the appraiser,
3. There is no paper trail to follow.

Are there more situations just like this one?  Absolutely.  Will they all get caught?  Probably not.

What does this mean for the appraiser?           

While much of the blame for this situation was placed on the lender and appraisal management company, you cannot discount the fact that some appraisers were meeting demands when the lenders were asking for inflated numbers or contracted sales price matching in their values.

In the appraisers quest to have the HVCC rules reversed or suspended for 18 months, this definitely puts a damper on it.  While the suit focuses on the lender, the politicians will be looking at how to control the appraisers.  Their assumption will be that if the appraiser acted as an unbiased third party, none of this would have happened.