HUD & FTC Quietly Investigates KB Home
    What prompted HUD’s investigation that resulted in a $3.2 Million Fine
for improper lending practices? 

         Over the past 4 years, HUD and the Federal Trade Commission (FTC) have been quietly conducting investigations into KB Home’s questionable business practices.    

         In early 2000, HUD, the FTC, and various legislators were inundated with complaints from homeowners whose KB Home houses were falling apart.  The complaints had a common theme --water running throughout the subdivision, cracks on interior and exterior walls, and foundation problems.  KB Home compounded these problems by ignoring requests for customer service.  Some people even complained that after several years they still had their original punch list of items that had not been addressed. 

        Residents of the Northampton subdivision in San Antonio , led by Gulf War Veteran Wilbur Riley, felt they had had enough and became the center of media attention.  Families from other subdivisions soon united and were also featured in the daily media reports.  A packet containing over two hundred complaints was sent to HUD, FHA, VA, FTC, and elected officials.  The complaints got the attention of Senator Kay Bailey Hutchison, Senator Phil Gramm, Congressman Ciro Rodriguez, and Congressman Charles Gonzalez, who called for investigations.

KB Home put out a few fires by buying some of the homes back, including Wilbur Riley's, and began a vast PR campaign of home give-away gimmicks, half-hour TV infomercials, and massive newspaper ads, rather than changing their old habits. They even hired the ex-secretary of HUD, Henry Cisneros, who began to build affordable housing under the name of American City Vista. 
 

In the face of the federal investigations and another packet of 250 complaints, in addition to individual complaints from all over the country, KB Home continued to be defiant.  This time, some of the complaints came from families who had purchased homes that KB had earlier bought back in Northampton , only to discover defects that had been covered by cosmetic repairs.

But by early 2003, KB Home was still in the news, not just in Texas , but Arizona , Colorado and California .  In Texas , the demonstrations had spread to other cities, including Austin, Houston and Dallas, where KB Home had constructed homes on an old bombing range that was ranked as a #1 federal priority clean up of bombs by the US Army Corps of Engineers.  
 

Documents from the HUD’s Denver   Homeownership   Center confirmed KB Home had submitted false HUD Builder Certifications (forms 92541).  Then in early 2003, Congressman Charles Gonzalez called for a HUD investigation of Mirasol Homes, a $40 million HUD project also built by KB Home.  Experts remarked that the 1-year-old homes were so bad that expensive repairs and high long-term maintenance would cost more than simply tearing them down and starting over. 

On July 6, 2005, HUD reached a $3.2 million settlement for violations by KB Mortgage Company involving a number of poor underwriting practices, such as approving loans to borrowers who were not eligible, approving loans based on overstated or incorrect income, failing to include all of borrowers' debts, failing to properly verify sources of funds, and failing to ensure gift letters met HUD requirements.

FTC fines KB Home for repeated violations of a 1979 federal consent order.  
The KB Home investigations continue… 

HUD Audit Report - Issued July 17, 2006
KB Home Mortgage Failed to Ensure Underwriting Certifications for Federal Housing Administration Loans Were Accurate

See letters that document KB investigations
          HUD & FTC Investigation

KB Homeowners are entitled to extended warranty without Binding Arbitration Requirement

• July 6, 2000 –  Letter to US Senator Kay Bailey Hutchison
•  July 6, 2000 – Letter to Federal Trade Commission Enforcement Division
•  October 20, 2000 – Letter to US Senator Kay Bailey Hutchison
•  April 4 2001 – Confirmation of formal investigation of KB Home from the Under Secretary of Veterans Affairs to US Senator Phil Gramm
  
  HUD & FTC Investigation
   
•  May 23, 2003 – US Congressman Ciro D.Rodriguez to the FTC after touring the Northampton subdivision
•  June 17, 2003 – US Congressman Charles A. Gonzalez
•  June 26, 2003 –The Federal Court of Laredo and the FTC turns up the heat.
  “Let’s Make a Deal KB Style”  See letter to the Federal Trade Commission to make a new deal that would allow KB to offer a 10-Year Non-Binding Arbitration clause or a 12-Year Mandatory Binding Arbitration
•  July 15, 2003 – Letter to the US District Judge Keith Ellis from retired Chief Justice of the First Court of Appeals Alice Oliver Parrott –  Repeated, flagrant violation of a federal court judgment regarding Mandatory Binding Arbitration