The suit also alleges that Countrywide was flipping loan applicants from a "full doc" loan program to a "stated income" loan program (NINJA) and demanding that 10% of the backlog of its unapproved loan applications be approved each day, while also fabricating income levels (Shadow Approvals) for applicants. See Mark Zachary's federal lawsuit: Download ZachvCntrywd.pdf
Zachary began having concerns about the lending practices when he discovered, a month after he started with the company, that Countrywide used only one appraiser for KB Home, the lawsuit claims.
"The appraiser, as known to Countrywide executives, was being strongly encouraged to inflate the homes' appraised value by as much as 6 percent to allow the homeowner to "roll up" all closing costs" according to the lawsuit.
Zachary said, "Not only would the home buyer be duped by this act, the end investors (the secondary market) providing funds for these loans were also duped because they were not made aware that the actual home value could actually be less than the loan amount tied to the mortgage note."
The suit alleges that, "This inflated value put the buyer upside down on the home immediately after purchasing it; thus, setting up the buyer to become more susceptible to defaulting on the loan."
See Mark Zachary's federal lawsuit Download ZachvCntrywd.pdf