SEATTLE - A group of Washington homeowners this week filed a lawsuit against Countrywide, a wholly owned subsidiary of Bank of America (NYSE: BAC) and the nation's largest mortgage company, claiming the mortgage giant illegally rigged the appraisal process in a scheme to boost profits at the expense of homeowners and independent appraisers. Press Release Link
Filed under the Racketeering Influenced and Corrupt Practices Act (RICO), the suit claims that Countrywide forces homeowners to use its wholly owned subsidiary LandSafe, for appraisals. The company then turns around and subcontracts the work to independent appraisers while charging homeowners as much as 200 percent of the actual cost of the appraisal. Download Hagens_Berman_ClassAction
The suit also contends that if independent appraisers do not accept Countrywide's fee structure or appraisal guidelines, they stand the risk of being blacklisted for further work by the industry giant.
The lawsuit, filed in U.S. District Court in Se attle, seeks to represent all homeowners who purchased or refinanced their home through Countrywide and LandSafe, and asks the court to award plaintiffs damages.
"As we investigated Countrywide for our clients, it was immediately obvious that Countrywide is a well-oiled operation," said Steve Berman, managing partner and lead attorney at Hagens Berman Sobol Shapiro. "Unfortunately, the company's efficiencies are focused on soaking every penny from consumers and independent appraisers in ways we believe violate the law."
The lawsuit claims LandSafe subcontracts much if its appraisal work to a network of independent appraisers, but offers them rates as low as $140 per appraisal. The company then marks the costs of the appraisal back as high as $410 when invoicing homeowners.
The suit also claims that Countrywide, through its arrangement with LandSafe, has excessive influence on the appraisal process, designed to be an independent verification of a prope rty's value.
"When you control the entire appraisal process, including your hands around the necks of appraisers financially speaking, you have a lot of influence," Berman added.
Berman noted that hundreds of thousands of homeowners have fallen prey to the alleged scheme.
The suit states that if appraisers fail to agree to the fee schedule set by LandSafe, their names appear on the Field Review List, a database of appraisers Countrywide refuses to use unless the mortgage broker also submits a report from a second appraiser.
Plaintiffs claim that Countrywide created LandSafe to guarantee a continual source of significant profit and control over the appraisal process.
The real estate market boomed from 2000 through 2006, allowing Countrywide to exert its will on appraisers, forcing them to lower fees for loans. Countrywide maintained market rates to its borrowers and kept the excess, all for no additional services rendered.
The plaintiffs, Carol and Gregory Clark of Washington state, refinanced their home in February 2007. Countrywide required them to use LandSafe for their home appraisal. Under the Real Estate Settlement Procedures Act (RESPA), Countrywide is required to provide an 'Affiliated Business Arrangement' disclosure to its customers. This alerts customers that LandSafe is a subsidiary of Countrywide.
However, according to the lawsuit, the Clarks never received an 'ABA Disclosure' document. While Sound Value performed the appraisal, LandSafe charged the Clarks $410 and paid a fraction of the fee to the third party, the suit claims. The lawsuit cites violations of federal law under RICO and RESPA. Other counts include unjust enrichment, breach of fiduciary duty and violation of California unfair competition law.
You can learn more about this case by visiting www.hbsslaw.com/CFChomeowners