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HOBB Weekly Update Message
Tuesday, 02 October 2007

Builders Exposed - All the signs were there…  Who are the real losers?  

A message from Janet Ahmad
Builders Exposed - All the signs were there…  Who are the real losers?
 
The review of events reported in this News Update began years ago when the building industry devised a plan to make billions, and now the walls are caving in on them.  The questions are; what kind of scams will the next generation of homebuilding with empty promises of sound homeownership bring to our communities? How can we prevent history from being repeated? 

All the signs were there, even before July 2005 when HUD fined KB Home $3.2 million for mortgage irregularities. Not long afterward its CEO Bruce Karatz was caught in a scandal of messing with backdating stock options.

Shortly thereafter the Charlotte Observer announced an FBI Beazer Homes Investigation in a four-part series that exposed Beazer’s lucrative scam of loan fraud involving first-time buyers.

Instead of stopping the bleeding a band-aid of industry spin obscured
 the industry sins. Using skillful marketing techniques on young first-time homebuyers, friendly sales representatives worked their magic to create ‘pulse-loans’ – if a individual entering the model home door had a pulse, the builder’s loan company had a mortgage for them and the house was thrown up in a matter of days.

Scams of the powerful homebuilding industry are slowly and painfully unfolding daily in nationwide news. The first eye-opening report came on August 13, 2007 in a BusinessWeek special report
 ’Bonfire of the Builders,’ where the editors discussed “how by rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis. Now they’re hurting—and so is Wall Street.”  

In one of the articles this past week American Watchdog explains how the 2007 real estate disaster happened and what consumers should know and do.  “For over three years Americas Watchdog has been warning of a coming real estate disaster, as a result of greedy lending practices. Despite the warnings, mortgage lending practices did not change, greedy mortgage lenders & homebuilders had their way with unsuspecting consumers, and now the US economy is tittering on the verge of a serious recession or worse.”

Currently the bad building practices of Lennar are being reported and showing a significant pattern of critical design flaws, construction defects and customer neglect. In my message in the May 13, 2007 HOBB News Update I reported that Lennar was getting blasted in a number of states especially Florida and the South Carolina, Westcott Plantation where homeowners were demanding Lennar Homes buy-back their defective homes.   

Friday, Lennar may have met their match when Erin Brockovich held a press conference announcing she would represent the South Carolina, Westcott Plantation homeowners after she confirmed high levels of Volatile Organic Compounds (VOC’s) contaminates in their community. 

Also in town was Georgia’s HOBB Rep. Scott Kimball to support the Lennar homeowners as well as
 the Arbitration Fairness Act of 2007 that would discourage binding arbitration in builder contracts and the Home Lemon Law.

If things aren’t bad enough for Lennar its all too familiar construction defects are getting attention in Texas. Ten days ago unhappy
 Hutto, Texas homeowner’s packed city hall asking that Lennar buy-back their homes after the City Building Officials confirmed construction defects in their Hutto Parke community

Meanwhile, b
uilders are whining that business is in the toilet and homebuilder stock prices have plummeted by as much as 75%.  Stockholders are crying over their losses in the stock market and filing lawsuits. Investment groups urge homebuilders to address compliance failures. September 7. 2007 the giant Countrywide Mortgage announced it was cutting 12,000 jobs as rumors of bankruptcy spread. Beazer is on the verge of bankruptcy and KB Homes is still limping along as other builders use splashy campaigns, auctions, to clear out inventory.

Who are the real losers; the answer is every taxpaying citizen in America? Families, when the breadwinner looses his or her job because of its relationship to the building industry or mortgage industry. Those who were duped into believing they qualified for a house they couldn’t afford.  Communities sit with abandoned houses where house prices dropped overnight due to epidemic numbers of foreclosures.  The children who once danced and jumped for joy around the big new house now watch their friends and neighbor move out and soon move out to an unknown future as well.   

See the media coverage of the building industry exposed and more enlightening articles below!
Your participation is vital. Together we have and will continue to make a difference!  Help us to help you by keeping in touch.
We would like to hear from you so
, please take a few minutes to post your comments on the HOBB Forum .

Thank you,
Janet Ahmad, President
HomeOwners for Better Building

 **********************************************************************
NEWS UPDATES:

News 2 - Lennar meet their match, unhappy homeowners & Brockovich

Brockovich Plans to Sue
She made millions fighting for the health and safety of homeowners, a story that caught the attention of hollywood film makers. Now Erin Brockovich is part of a team seeking to represent several country homeowners in a lawsuit they plan to file in the near future. "I am here as an advocate first and foremost. I am as a consultant secondly," said Brockovich... According to the EPA volatile organic compounds or VOCs include a variety of chemicals some of which may be harmful. The chemical Brockovich's firm is now concerned with is benzene. The firm hired experts to retest some homes. Results showed various forms of benzene at, what she says, are higher than EPA-approved levels. Read more...

ABC NEWS 4 Lennar Troubles - Erin Brockovich and Contamination
Erin Brockovich Here To Help Westcott Plantation
“They've asked for help-they're sick, we're finding contaminants and somebody needs to give them some answers,” Brockovich pleads. Brockovich says testing at Wescott has shown higher than allowed levels of chemical compounds, mostly Benzene, a colorless and flammable liquid that used to be added to gasoline. Now she says that compound can be found underneath people's homes in levels more than 70 times the EPA allowed amount. Read more...

Erin Brockovich takes on Lennar Homes
Erin Brockovich to conduct inquiry in N. Charleston
Environmental advocate Erin Brockovich is investigating a North Charleston neighborhood that she said she believes is contaminated with a cancer-causing chemical... She said the Wescott case reminds her of other neighborhoods in the country she has studied, in which toxic chemicals seeped from waste sites to residential areas. An EPA official said the agency is investigating whether the areas in question have been used as dumping sites...Brockovich said she'll take on the Wescott case despite threats from Lennar. She said the company told her this week that it would conduct "a smear campaign" against her if she continued her investigation. Read more...

Live 5 News: Erin Brockovich takes on Lennar in Charleston
Westcott Plantation Worries Bring Erin Brockovich To Town
Erin Brockovich came to Charleston to help unhappy homeowners living in Westcott Plantation. "She flew out and met with homeowners, about eight of us, and brought in members of her own team to check into it," Hull says. They found the homeowners are bringing in other more dangerous chemicals, like benzyne and acetone, chemicals commonly found in paint thinner. Read more...

ABC News: Worst Month for New Home Sales in 7 Years
During the Past Year, Sales of New Homes Have Dropped 21 Percent
 August was the worst month for sales of new homes in seven years, according to figures released this morning by the government. The official sales pace for last month was a seasonally adjusted annual rate of 795,000 units – well below the 867,000 economists were betting on and the slowest since June 2000. Read more...

Public Citizen Reports on Binding Mandatory Arbitration
Report faults binding mandatory arbitration
Credit card holders stand little chance of winning in mandatory arbitration of disputes with their banks, according to a report released Thursday by national consumer advocacy group Public Citizen. Arbitration firms used by companies such as MasterCard Inc., Visa, Discover Financial Services LLC and American Express Co. ruled against consumers in about 18,000 of 19,000 disputes analyzed in Public Citizen’s study. The group examined data from California because it is the only state that requires arbitration companies to publish the results of cases they hear. However, consumer advocates at Public Citizen and in Maryland are confident the problem is national in scope. Read more...

Group Claims These Are Just the Initial Stages, with More Homeowner Hardships to Come
Real Estate Disaster the Result of Greedy Lenders and Homebuilders, Says Watchdog Group
 According to the release, the single biggest contributor to the 2007-2008 real estate disaster has been mortgage lenders being most concerned about making fast profits, regardless of the long term impact on the economy. This boils down to nothing more than greed, which AW says manifested itself in three primary ways: pay option adjustable rate mortgages, stated income loans and massive appraisal fraud on the part of homebuilders... Massive appraisal fraud occurred when homebuilders conspired with appraisers to over-value builders' new houses by as much as 25 to 35 percent. As a result, says AW, homeowners in existing neighborhoods naturally assumed their homes were worth more money than they actually were. AW says that now "our big worry is formerly hot real estate markets adjusting down 25% to 35% to pre-frenzy levels by this time next year." Read more...

Binding Arbitration - Little guy seldom wins, study finds
Binding arbitration a loser for consumer
In a review of 34,000 arbitration cases, Public Citizen said that companies initiated nearly all of the cases and used arbitration firms that they know will rarely rule in favor of consumers. The report focused specifically on cases handled in California by Minneapolis-based National Arbitration Forum. California is the only state that requires arbitration companies to publicly disclose details of arbitration cases. Read more...

PR Web: New Home Implosion Just Beginning 
Americas Watchdog Explains How The 2007 Real Estate Disaster Happened Along With A Grim Preview of 2008 
For years Americas Watchdog has been warning about the implosion of the US real estate "bubble." Wall Street talks like the problem is behind us. In reality the "problem" is just in its initial stages, with more severe hardships that will affect individual homeowners as well as the over all economy. In order to better understand this real estate and economic disaster, Americas Watchdog along with its Homeowners Consumer Center have put together the main reasons this disaster happened, along with what citizens can do to position themselves from the storm that is about to come. Read more...

KB Home Troubles Deepen as Cancellations Increase
KB reports $35.6 million loss in Q3
Home builder KB Home (NYSE: KBH) on Thursday reported a net loss of $35.6 million in the third quarter ended Aug. 31, compared with net earnings of $153.2 million in the same quarter last year. KB Home's home-building operations generated 3,907 net orders in the third quarter, down 6 percent compared to third-quarter 2006. And the company's 2007 third-quarter cancellation rate of 50 percent was lower than its 60 percent cancellation rate in third-quarter 2006 "but higher than the 34 percent rate in the 2007 second quarter, reflecting the challenged housing and credit environment." Read more...

Pulte Fails to Install Hurricane Clips
 Builders Eliminate Hurricane Clips 
In 2004 Pulte Homes decided to stop installing hurricane clips on houses that they are building in Sun City Hilton Head, a hurricane-prone area located near the coast. Pulte has recently resumed installing hurricane clips on new houses that they're building here, but refuses to install them in the more than 2,000 houses they built in 2004, 2005, 2006 and early 2007 Read more...

Public Citizen Audio Report on Binding Arbitration
Creditors have upper hand in disputes
What credit squeeze? The Federal Reserve says Americans are charging as much stuff as ever on credit cards. But a report out today from the consumer watchdog Public Citizen says that when we dispute those charges, cardholders lose almost every time. Helen Palmer reports. Listen to this Story

AARP Reports: Pennsylvania to regulate Builder Arbitration
Pennsylvania Moves to Regulate Home Building Arbitration Contracts
The Pennsylvania House of Representatives is considering legislation that would set conditions for the enforcement of pre-dispute arbitration agreements in contracts between home builders and customers, and make a failure to comply grounds for a court to void the clause... The bill would make a home construction contract voidable by the consumer if it has any of the following types of clauses, a clause purporting to waive a customer's right to a jury trial, an agreement not to assert any customer claims or defenses arising out of the contract, a provision authorizing a homebuilder to recovery attorney's fees and costs from the customer... Read more...

Investment Group blame builders for selling families homes they could not afford
CtW Investment Group Urges Homebuilders to Address Compliance Failures
The CtW Investment Group, pointing to large homebuilders’ role in creating the current crisis in the housing and credit markets, today called on the boards of directors of the nation’s largest homebuilders to establish dedicated compliance committees to protect the companies and their shareholders in the face of mounting legal and regulatory scrutiny. “Homebuilders are not passive victims here,” said Bill Patterson, Executive Director of the CTW Investment Group.  “Through improper business practices, particularly within their mortgage affiliates, the nation’s largest homebuilders in fact helped cause the industry-wide collapse. This turmoil has already destroyed billions in shareholder value, while exposing shareholders to considerable legal, regulatory and reputation risk.” Read more... 

Houston KHOU TV: Contractor Sting
A catch and release contractor sting
The Texas Department of Licensing and Regulation conducts stings, looking for unlicensed contractors. “Jason, this is a huge problem here in Houston,” one undercover investigator said. “Not only in this city, but all across the state of Texas.”  Investigators invited 11 News to take part in their second such operation in Houston. Agents have taken these stings statewide, but they can’t arrest violators. They can only issue fines that can go as high as $5,000. In April, investigators caught almost 40 men at one location, including Adrian Kenrick. He was notorious at the time for allegedly taking money without finishing work. Now he’s now paying off a $3,000 penalty. Read more... 

Lennar Troubles Worsening
Lennar Reports Biggest Loss in Its 53-Year History
Lennar Corp., the largest U.S. homebuilder, reported the biggest quarterly loss in its 53-year history after $848 million of costs to write down the value of real estate. The third-quarter net loss was $513.9 million, or $3.25 a share, exceeding the most pessimistic estimates from analysts and suggesting the worst housing market in 16 years shows no signs of stabilizing. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years. Read more...

Lennar the Latest to Downsize
Troubled home builders turn to layoffs
Lennar Corp. became the latest to downsize, revealing Tuesday that it has slashed 35 percent its work force amid the national mortgage crisis. The latest cuts follow similar moves by other big builders. Pulte Homes Inc. cut 1,400 full-time jobs, or 10 percent of its work force, last year. Centex Corp. also slashed 10 percent of its salaried work force in 2006 to around 6,400. A tightening credit market, rising foreclosures and the sales slowdown have boosted housing inventory while forcing painful markdowns that have hurt housing companies' bottom lines. Read more...

Homebuilder Mortgage Fraud Exposed
Mortgage scam threatens 200 homes with foreclosure
...The couple now fear they are victims of a $100 million mortgage fraud that may have touched hundreds across the south metro. Up and down their street, friends and neighbors who rented from Parish Marketing and Development - an Eagan homebuilder - have received foreclosure notices informing them their two-story dream homes will be sold at sheriff's sales. Some houses already have been resold.  As the housing market has cooled and foreclosure rates have skyrocketed, authorities are investigating a bevy of mortgage fraud cases across the state and nationwide - particularly in rural and far-reaching suburbs. This latest investigation is notable not only for the dollar amount but also for the number and concentration of homes. Read more...

Defective Lennar Homes in Texas
City of Hutto Confirms Defective Lennar Homes
After Thursday night’s City Council meeting some are saying the commonality of expansive soils problems and defective trusses are a major concern. Hutto Chief Building Official Daniel McDowell reported to the council that excessive mail pops, cracks in drywall, slabs and masonry are prevalent and that homeowners are complaining that Lennar Homes repairs are inadequate.  McDowell found that excessive movement has caused increased stress loads to the building components due to expansive soil in the area; causing the structures to shift beyond normal tolerances causing the cracks. Angry homeowners stepped to the podium complaining they obtained what they say are falsified HUD Builders Certification, form 92541, in which Lennar certified that the soil the homes were built on was not expansive.  See Building Official's Report...

The Housing Bubble - Money Pit
The Gold Mine Has Turned Into The Money Pit In Florida
The Bradenton Herald reports from Florida. “Jo Lynne Navarro wants her $270,000 back. That’s how much the Sarasota County woman paid to reserve two Bel Mare at Riviera Dunes condominium units two-and-a-half years ago. The units existed only in glossy sales brochures at the time, but Navarro - like many others lured by a sizzling condo market - was eager to buy early.” Read more...

Analyst predict Lennar & KB in worse shape
Homebuilders Slash Prices as Earnings Fall
A Lennar property in Florida demonstrates the industry's dilemma heading into a key week of earnings and data. Video: TheStreet.com

Lennar Homes trouble brew in Texas
Hutto residents protest Lennar subdivision
Since purchasing their new homes, numerous residents of the Hutto Parke subdivision say they have found cracks and nail pops in their walls and ceilings, foundation problems and defective roof trusses - and do not want others to have to experience the same. Residents allege the subdivision's homebuilder, Lennar Corp., sold them "defective homes" and lied on Housing and Urban Development documents, claiming the homes were built on un-expansive soil. Read more...

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

 

 

 

 
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