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HOBB Weekly Update Message
Sunday, 01 April 2007

A message from Janet Ahmad - Scandals, scandals and more builder scandals... The biggest news week of the year

A message from Janet Ahmad
Scandals, scandals and more builder scandals...
 The biggest news week of the year
Things are changing… Colorado Lawmakers have approved the Homeowner Protection Act of 2007.  In Texas the Dallas Morning News says in an editorial that the Home Lemon Law is a Good Idea.  Now, if we can get lawmakers to see that it just makes good sense, that would a better story.

Then there is a very interesting article in the Picayune Item featuring Charles Lee, President of the Pearl River County Home Builders
Association, who talks about builder scams, and “problems typical of housing built by individuals with no license and insurance who use poor quality materials in order to make a huge profit. (Read the article in Part 2 news updates)  Meanwhile, in other states the Industry continues to spend big bucks to stop any regulation and whine about proposed laws to provide basic consumer protection.

Dominating the scandal headlines this week are Charlotte North Carolina and San Antonio Texas.

The Charlotte Observer published an exceptional four part series on the FBI investigation of Beazer Homes for the biggest loan fraud scheme in the homebuilding industry so far.  Stay tuned – this one is only the tip of the iceberg.

Last Week KB Home profits plunged 84% and this week RealMoney.com Columnist, Jim Cramer referred to KB Homes as “one of the worst homebuilders.”   Speaking of KB… The scandal of KB Home and the San Antonio Housing Authority (SAHA) squandering $48M on a botched HUD HOPE 6 project is still in the news.  After the appearance of angry KB residents before the State Affairs Committee, city, county and state officials huddled behind closed doors to find ways to get houses bought back.  The top story of this week’s scandal was the appearance of families before the San Antonio City Council telling of chronic illnesses of 15 children in the community, including 2-year-old Brandon De Los Santos who became critically ill.

The sad revelation is that SAHA records show a revolving door policy in a lease to purchase scam that cheated families that could least afford it.  One by one, families were intentionally promised homeownership knowing clearly most would never qualify to actually buy the KB built defective homes.

Your Help is needed:  Help us to make meaningful changes by volunteering your time, talents and expertise.  Continue to respond to the authors of these weekly news articles.  

1. Let reporters know how pleased and excited you are for writing articles on these important issues.
2. Forward these articles to others and especially to your elected officials, along with your personal comments.
     See:
Take Action 101 to find contact information for elected officials.      

3. We would like to hear from you, so please take a few minutes to post your comments on the H O B B   F o r u m .

Together we have and will continue to make a difference!  Help us to help you by keeping in touch. Your participation is vital.


Thank you,
Janet Ahmad, President
HomeOwners for Better Building
 
**********************************************************************
NEWS UPDATES:

Colorado House approved restoring homeowner’s legal rights
State House Approves Homeowner Protection Act
The House approved and sent to the Senate on Thursday a measure that would bar home buyers from waiving their warranties that force home builders fix defects. "This gives homeowners a fighting chance if they find out that their new home has serious problems," said Rep. Jack Pommer, D-Boulder. Read more...

Colorado Lawmakers Approve Homeowner Protection Act of 2007
Bill protecting homeowners supported
Homeowners would not be able to sign their rights away in contracts with builders under a measure lawmakers initially approved Wednesday. House Bill 1338, dubbed the Homeowner Protection Act of 2007, would prohibit homebuilders from forcing buyers to sign contracts with certain provisions if they want the property. Under the bill, the provisions in the contracts designed to protect builders from lawsuits would be voided if there is fraud or gross negligence. The homeowner also would not be able to waive home-repair costs that are currently allowed by state law. Read more...

House Bill 1338 - Homeowner Protection Act of 2007 to restore legal rights
Colorado Senator Veiga Discusses Homeowner Protection Act
Home buyers deserve a threshold of basic legal protections, according to Senator Jennifer Veiga (D-Denver), and a new measure introduced in the House will give homeowners the legal foundation to protect themselves against predatory home builders. House Bill 1338 will enact the Homeowner Protection Act of 2007, making it illegal for home builders to force or coerce buyers into signing away their rights. The Homeowner Protection Act will restore the rights of home buyers, by making these waivers illegal. "This measure is pro consumer," said Senator Veiga. "It is a fair and accurate balance between builders and buyers." Read more...

Newsweek: This Is Not My Beautiful House
As adjustable mortgage rates click upward, a Kentucky family is one of thousands forced from their dream homes and into the nightmare of foreclosure
How did the Howells' dream home turn into a financial nightmare? They are just two of thousands of homeowners caught in the double bind of rising adjustable mortgage rates and falling home values. For this family, like many others, the numbers got bleak fast. The monthly payments on the Howells' two adjustable-rate mortgages started at $1,100, with a 5.4 percent interest rate (Howell says he needed two mortgages to qualify for the amount necessary to buy the house). But after Shawn returned from Iraq in 2006, the family's interest rate jumped to 9.9 percent—a surge he says he knew was possible but nonetheless took him by surprise...according to RealtyTrac's data. That's one foreclosure filing for every 92 U.S. households. Read more...

No Need for More Inspections of Defective KB Homes?
Study showed problems
While the San Antonio Housing Authority investigates whether the homes on Precious Street are to blame, KENS 5 has uncovered evidence about the homes that begs the question, why are people still living in them in the first place? According to a study from four years ago, these problems were predictable. So why wasn't action taken sooner? "These houses have been inspected, re-inspected," said Janet Ahmad, with Home Owners for Better Building. Ahmad questions the need for more inspections, when the writing is already on the wall. KENS 5 has learned that in 2003, following similar complaints, SAHA hired American Construction Investigations to inspect Mirasol homes, built by KB Home. Related report: See excerpts from American Construction Investigations...    Read more...

San Antonio: KB Home should buy back houses not taxpayers
SAHA boss promises Fortuna problems will be fixed
Responding to City Council demands that housing officials address shoddy construction and possible health hazards at the Villas de Fortuna subdivision, San Antonio Housing Authority CEO Henry Alvarez vowed Friday that SAHA will correct the problems. Randy Zaragoza,... After numerous requests for repairs, inspectors found a leak in the back of the unit that allowed it to draw insulation and dust from the attic and distribute it through the house. "SAHA has known about this for years. Why haven't they done anything until now? Why did they wait until a child almost died?" he asked. "SAHA should look at all 247 houses (in the five Mirasol subdivisions). I'll bet they all were built this way..." Homeowners' advocate Janet Ahmad, who is working with Fortuna residents, said the houses should be bought back, but not by taxpayers. "Why should they pay twice for the same house? The builder should buy these houses back, not the taxpayers." Read more...

San Antonio City Council hears "The Nightmare on Precious Street"

SAHA owners take health concerns to council
Residents on Precious Drive want immediate action taken after health concerns are raised over toxic mold. The Nightmare on Precious Street just got serious tonight. First SAHA residents complained of foundations problems, now their children sick from possible mold and bacteria in the homes.  Tonight they demanded action from City Council.  Karen Grace is live at City Hall - I can tell you that about 15 children all who live on this same street are all sick.  And tonight parents pleaded with the city to buy back their homes... “You can replace my house but not my children…”  View Video Report, "Nightmare on Precious Street"

San Antonio Residents continue to appear at City Council about KB Homes
SAHA talking about subdivision buybacks
Homeowners said they were contacted personally by SAHA CEO Henry Alvarez who later met with them to look at preliminary numbers for purchase of the West Side homes. Some said those numbers showed they could get checks for $40,000 to $60,000, based on a hypothetical appraisal of $110,000. The total amount and source of the funds for any buyback program remain unclear...Though some residents initially were excited about Alvarez's proposal to buy back their houses, their enthusiasm cooled after news that 2-year-old Brandon De Los Santos, who has had respiratory problems since moving into his house in the 500 block of Precious Drive in January, had seizures over the weekend. Read more...

San Antonio KENS 5 - KB/SAHA Toxic Home?
 Family says there's toxic mold in SAHA home 
Family forced to live in a motel after their doctor says their home may be toxic. This family is claiming that their house is making their little boy so sick they had to evacuate. See video

San Antonio KSAT 12 Report- Doctors Order Family To Leave Home
Couple Says SAHA Home Made Their Son Sick
"When we moved in like Jan. 13, my son started to get sick," Peter De Los Santos said. The San Antonio Housing Authority sold the home to the couple as part of an initiative to get low-income families to become homeowners. Since that time, the couple said that Brandon has been hospitalized several times. Brandon sometimes stops breathing in the middle of the night and recently had his first seizure, his parents said. Brandon is taking several medications. Read more...

San Antonio Housing, KB & sick children
FOX News: SAHA HOUSING PROBLEM
Cystal is one of several residents I spoke to in this area who say their homes are making them sick... The homes are built by KB Homes and sold by the San Antonio Housing Authority. The housing authority is considering buying back some of the homes... View Video Report - Click on News - Then FOX on Demand, SAHA Housing Problems - 3/29/07

Texas Builders Whining Again
Senators tear into homebuilders
The Texas Association of Builders and the Homebuilders Association of Greater Austin found their testimony Wednesday less than well-received at the Senate Transportation and Homeland Security Committee. The builders oppose three bills expanding land use control for cities and counties along Texas 130. Sen. Kirk Watson, D-Austin, who sponsored the bills (SB 1688, 1689, 1690) criticized the groups for not working with him earlier to try to address their concerns. He also accused the Austin homebuilders group of sending inflammatory e-mails to its members containing erroneous information about the proposed legislation.
 Read more...

Beazer facing lawsuit and hard times
Beazer hit with suit seeking class action
The suit names as defendants certain company officers and directors, alleging that between July 27, 2006 and March 27, 2007, the defendants "issued false and misleading statements" about the company's business and prospects and failed to disclose to the investing public several "adverse facts." First, the suit alleges Atlanta-based Beazer (NYSE: BZH) did not have required internal controls over its lending practices and that because of alleged improper lending practices prior to and during the class period, it lead to foreclosures and other problems. Read more...

Atlanta Journal-Constitution Reports on Beazer Loan Fraud
Beazer probe spotlights builder financing
While federal agencies scrutinize the lending practices of Atlanta-based Beazer Homes, other national home builders continue to promote financing incentives through the affiliated lending programs they have offered for decades. Critics say relaxed lending standards and a go-go housing market have created a system ripe for abuse. People in the industry defend builder mortgage services as convenient and safe for consumers. Read more...

WSOC TV Charlotte: Beazer Investigation
FBI Investigating Charlotte Home Builder; Company Denies Wrongdoing
The Federal Bureau of Investigation is looking into a Charlotte home builder. Agents are checking out the business practices of Beazer Homes, including the arrangement of mortgage loans for buyers in its subdivisions... In just the past five years, foreclosures have climbed 62 percent in Mecklenburg County, and those foreclosures are frustrating residents. Read more...

Special Charlotte Observer Feature - Part One: Sold a Nightmare
PART ONE - CHARLOTTE OBSERVER INVESTIGATION
Concord subdivision proves lucrative for builder and costly for 1st-time owners. Mark and Lea Tingley bought a new home in 2001 in a subdivision called Southern Chase. Photos on the family computer show a smiling young couple holding a baby girl in a bare room. They recall feeling surprised they could afford a house. And thrilled. It was their first home, their largest investment; in the neighborhood where they planned to raise a family...Seventy-seven buyers have lost homes to foreclosure in a subdivision of 406 homes. That's about one in five, more than six times the national rate. Read more...

                CONTINUED:  SEE MORE NEWS UPDATES – PART TWO

Charlotte Observer Part Two: Starter homes, sad endings
Number of foreclosures climbs as 1st-time buyers lose low-priced houses
A wave of loan defaults in starter-home developments is pushing the foreclosure count in Mecklenburg County to record heights, an Observer analysis shows. Lenders foreclosed last year on more than 900 Mecklenburg starter homes, up more than 150 percent since 2003. Foreclosures of older or more expensive homes rose by only 18 percent during the same period. Read more...

Charlotte Observer Part Three: One builder, hundreds of foreclosures
10 Beazer developments in Mecklenburg riddled by foreclosures
In the past decade, Beazer Homes USA built more houses in Mecklenburg County that have since foreclosed than any other builder. Beazer built about 2,900 homes in Mecklenburg between 1997 and 2006. At least 388 have foreclosed. That is a rate above 13 percent, the highest among the county's 10 most prolific builders during that period, an Observer investigation found. Read more...

Charlotte Observer Part Four: Failed mortgages fly under the radar
From feds on down, no one keeps close track of foreclosures, limiting oversight
The city of Charlotte does not count foreclosures. Neither does Mecklenburg County. Nor the state of North Carolina. Nor the federal government. As a result, authorities did not notice an emerging pattern: Foreclosures increasingly were concentrating in starter home neighborhoods. Read more...

Special Charlotte Observer Feature
Sold a Nightmare 
Seventy-seven buyers have lost homes to foreclosure in Southern Chase, a subdivision of 406 homes...Some homes sat empty. Others became rentals. Prices dropped. Standing in his side yard last fall, Mark Tingley pointed to holes in his siding, garbage in neighboring yards, overgrown lawns, junked cars. He feels angry, cheated and trapped.  Beazer Homes USA said Wednesday it is cooperating with a federal investigation of its mortgage business. A subsidiary of the builder, Beazer Mortgage, arranges loans for many buyers in its subdivisions. Read more...

Builder mortgage scandals continue
Homebuilders Sinking Into the Subprime Mess
The news of an FBI probe into Beazer is a reminder that as the mortgage mess spreads, Beazer isn't the only builder to have a captive mortgage company to provide incentives so people can get into homes. (Though, as appears to be the case with the foreclosures in question at Beazer, not necessarily afford them.) KB Homes, for example, teamed with Countrywide in a joint venture that was created in 2005. Read more...

Business Week: Beazer headed for Big Trouble 
BusinessWeek has learned that the nation's sixth-largest residential builder is being probed in connection with potential mortgage fraud
Amid the meltdown of the subprime housing sector, mortgage lenders and brokers have come under fire from state and federal officials for predatory lending practices with those risky borrowers. Now one national homebuilder is feeling the heat. BusinessWeek has learned that federal investigators have opened a broad criminal probe into lending practices, some financial transactions, and other dealings at Beazer Homes USA. Read more...

Business Week - Beazer Investigation
FBI investigating Beazer Homes -report
Shares of Beazer Homes USA Inc. plunged in Tuesday's aftermarket trading session following a report from BusinessWeek magazine that federal investigators have opened a broad criminal probe of the homebuilder's lending practices, a number of financial transactions, and other matters....FBI spokesman Ken Lucas told the magazine Beazer is being investigated for "all types of (potential) fraud associated with Beazer -- corporate, mortgage, investments." Read more...

Dallas Morning News Editorial: Home Lemon Law Good Idea
Lemon Law For Homes
You scrimped and saved for years to buy a new home, only to have your euphoria cut short when you find serious construction flaws and learn that your homebuilder isn't about to pay up. The Texas Residential Construction Commission was supposed to provide homeowners recourse against shoddy homebuilders. Mostly, though, the commission has been a disappointment. Read more...

Lennar in Trouble - Profits down 73%
Beazer Homes shares plunge 17 percent
Shares of Beazer Homes USA Inc. fell more than 17 percent in after-hours trading after the FBI said it is among agencies investigating possible fraud in the company's mortgage lending practices and other financial transactions. The Atlanta-based company, which has suffered hefty losses amid a downturn in the housing market, is the subject of an investigation by the FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, FBI agent Ken Lucas said Tuesday. Read more...

Mississippi Homebuilder's Association supports licensed and insured builders to prevent scams
Scams can abound in construction
“Common problems in our area,” says Charles Lee, President of the Pearl River County Home Builders Assoc, “are foundation problems, electrical problems, and poorly braced roofs. Just pray for no snow in this county.” Another problem is lack of smoke alarms or old smoke alarms. These problems are typical of housing built by individuals with no license and insurance who use poor quality materials in order to make a huge profit. Read more...

KB Homes is one of the worst homebuilders - Subprime risk only problem for buyers
Construction Boom: Built-In Subprime Risk
Going forward, credit-toughening-wise, if you are going to get a loan with little money down, you can easily get one from the Federal Housing Administration, but you have to put 3% down. Can we accept that if you can't put 3% down, you aren't ready for the American dream?...Now, how bad is it going to be for the public homebuilders? Take a look at the earnings call from KB Homes (KBH - Cramer's Take - Stockpickr - Rating). Let's stipulate that KB Homes is one of the worst homebuilders, with a big California component. But if you go through the quarter, the exposure to bad loans has already washed through. The building of new homes has been cut back to "only build if sold ahead." The building loans are from Countrywide. Read more...

Man falls through his new home floor
Berkeley man sues home builder after he fell through floor
MARTINSBURG - A Berkeley County man claims the construction company that built his home is responsible for him falling through his bedroom floor. James Hughes filed the suit March 2 in Berkeley Circuit Court against Dan Ryan Builders. Hughes claims that on March 12, 2005, he was in his Martinsburg home that was built by Dan Ryan Builders. He says he got out of bed and walked across his bedroom floor to go to the bathroom. While walking, the floor gave way, causing Hughes to fall and injure himself. He suffered serious injury and has already incurred $30,000 in medical expenses, the suit says. He has also lost more than $25,000 in income. Hughes claims the builders were negligent and failed to construct his home in a safe condition. He seeks compensation for his medical expenses and lost income and also seeks court costs.

KSL News Radio: Driveways Falling Apart, Builders Blame Homeowners
Residents Blaming Homebuilder for Flakey Driveways

We're talking maybe at least 100 homes with the same driveway cement problems. There are two things in common, they're all flaking apart in the same way, and all of them are Richmond American homes. The landscaping is nice, the views are nice and the neighborhood is safe, but the driveways in Stansbury Park are problematic. It leaves you wondering what's wrong? John Bishop, a resident of Stansbury Park, said, "They said it was our fault because we had salt on our tires when we drove up the driveway." Read more...

Houston Chronicle: Investors Falling Into Foreclosure
More and more novices are being flattened by the quirks of the Houston area's condo market, as well as scams
More investors looking to make an easy buck in the Houston housing market are fumbling into foreclosure. Local real estate experts say an increasing number of available properties and steadily rising home prices have attracted novice investors who are being done in by Houston's quirky condominium market, scam artists and inadequate planning. Read more...



            



Janet Ahmad, President
HomeOwners for Better Building
http://www.hobb.org
210-402-6800

 
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