Homebuilders Pulte and Lennar sue AG over hiring of law firm to probe lending
...one of the homebuyers filing complaints, purchased a Pulte home in Las Vegas in 2007 with a 20-percent down payment and a good credit score. The union alleged Pulte inflated the home price, used incentives to steer her to Pulte’s lending affiliate and failed to disclose important mortgage terms, particularly that the interest rate could increase after seven years.

Homebuilders Pulte and Lennar sue AG over hiring of law firm to probe lending

   
       In this file photo, home building continued in Anthem in late 2008 and
       in other Pulte Homes and Del Webb communities in the valley.

By Steve Green (contact)
Published Thursday, March 11, 2010

Home building giants Pulte Homes Inc. and Lennar Corp. are suing Nevada Attorney General Catherine Cortez Masto, charging she improperly hired a union-affiliated law firm to investigate predatory mortgage lending allegations against the companies.

In complaints filed Monday in U.S. District Court for the District of Columbia, the homebuilders say Cortez Masto and Arizona Attorney General Terry Goddard separately hired the law firm Cohen Milstein Sellers & Toll PLLC in violation of the builders' due process rights.

"The Cohen Milstein lawyers conducting these investigations represent a labor union, the Laborers’ International Union of North America (LIUNA), that is waging an extensive campaign against Pulte consisting of activities, including potentially illegal activities, designed to damage Pulte’s business and harm its shareholders. The purpose of this campaign against Pulte and other homebuilders is to coerce Pulte and other homebuilders into forcing their subcontractors to sign union agreements," charged the lawsuit filed by Pulte, which has built in the Las Vegas area under the Pulte, Del Webb and Centex brands.

"The rules of professional conduct prohibit Cohen Milstein from representing Arizona and Nevada in this matter while also representing LIUNA in matters adverse to Pulte," Pulte charged in its lawsuit.

The homebuilders also complain that the Arizona and Nevada attorneys general have retained Cohen Milstein on an impermissible contingency fee basis, giving them an inappropriate profit interest in the outcome of the investigations.

Lennar complained that the Cohen Milstein attorneys have been deputized by the state of Nevada to conduct the investigation, even though "constitutional due process prohibits state and federal government attorneys from having a financial interest in the outcome of the cases which they prosecute."

"The attorney general has yet to inform Lennar what authority allows the attorney general to hire outside counsel to conduct this investigation on behalf of the state of Nevada," charged Miami-based Lennar, which in Las Vegas has built under the Lennar, Greystone and U.S. Home Corp. brands.

The Nevada Attorney General's office today denied that the law firm at issue represents any private litigant or union in any case against Pulte and Lennar; and asserted it has the right to hire outside counsel to assist in its investigation of the predatory lending allegations.

"The investigation by our office results from the receipt of several complaints from Nevada residents against the companies raising serious allegations against Pulte and Lennar that they engaged in deceptive predatory lending practices against Nevada residents including falsifying and inflating income on loan applications; failure to disclose loan terms; changing agreed upon terms at the last minute without the buyer’s knowledge or consent; high interest ARM loans for people who requested and qualified for lower interest fixed rate loans; hidden balloon payments; and requiring people with good credit and down payments to take out 80/20 second mortgages at high interest rates," the Attorney General's office said in a statement.

The lawsuits indicate the Arizona and Nevada investigations were launched after LIUNA presented evidence to the attorneys general it said showed that during the housing boom, the builders harmed home buyers by inducing them into purchasing new homes at inflated values and with unaffordable mortgages.

During a September news conference organized by the union, a group of home buyers asked the Nevada Attorney General's office to take action on complaints alleging deceptive sales and lending practices.

A union press release said Constance Consentino, one of the homebuyers filing complaints, purchased a Pulte home in Las Vegas in 2007 with a 20-percent down payment and a good credit score. The union alleged Pulte inflated the home price, used incentives to steer her to Pulte’s lending affiliate and failed to disclose important mortgage terms, particularly that the interest rate could increase after seven years.

In May, LIUNA was involved in the filing of a lawsuit with similar allegations against KB Home and Countrywide Financial. That suit claimed they inflated home values and appraisals in Nevada and Arizona.

The union has also been critical of lending associated with other homebuilders including D.R. Horton, Beazer, Ryland and Richmond American.

Countrywide, now owned by Bank of America; Pulte, based in Bloomfield Hills, Mich.; KB Home, Lennar and the other homebuilders have denied allegations of improper lending activities.

http://www.lasvegassun.com/news/2010/mar/11/homebuilders-pulte-and-lennar-sue-ag-over-hiring-l/