WILLIAM VASTA / for the Daily
Journal |
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Redlands attorney Richard McCune is suing major homebuilders whose sales tactics he alleges contributed to a wave of foreclosures across the nation. |
By Jason W. Armstrong
Daily Journal Staff Writer
RIVERSIDE - Thousands of homeowners nationwide are expected to join a string of federal class action lawsuits accusing eight major homebuilders of using their in-house finance companies to approve people for loans they couldn't afford, contributing to waves of foreclosures pummeling their neighborhoods.
The eight suits filed late Thursday in the Central District's Riverside division name the California and national corporate offices of Standard Pacific Homes Inc., Richmond American Homes Corp., Lennar Corp., D.R. Horton Inc., Centex Corp., Shea Homes Inc., Beazer Homes USA Inc. and Ryland Group Inc.
The suits allege the homebuilders "set out to market and then finance unqualified buyers" who posed an "abnormally high risk of reclosure," underwriting sub-prime loans for borrowers with bad credit histories and inflated appraisals.
Once the builders collected the profits, the suits contend, they quickly sold the loans to other banks which often re-sold them, "further isolating defendants from the likelihood of loss from the risky loans." The plaintiffs allege that the companies bucked a duty to tell them they were moving into foreclosure-prone neighborhoods that would dramatically undermine their homes' values.
Mark Sustana, general counsel for Lennar in Miami, declined to comment on the suit against his client Friday, saying he had not yet seen it. Generally, however, he said Lennar's mortgage company has "rigorous lending standards, and we believe [it] complies with all applicable laws
and with the best practices in the lending industry."
The other builders named in the suits could not be reached by press time Friday.
The cases, which are expected to include thousands of homeowners across the nation, will seek "hundreds of millions of dollars" in damages from the builders, said Richard D. McCune, a name partner with McCuneWright, a Redlands firm representing the plaintiffs. The complaints allege fraud, violations of the federal Unfair Business Practices Act, negligent misrepresentation and breach of the implied covenant of good faith and fair dealing.
The builders financed those with shaky credit histories and little or no down payments to keep prices jumping during the housing boom earlier this decade, McCune said.
He said the litigation seeks to "force the home builders to take responsibility for their part in the devastating loss in home value in new housing neighborhoods."
The proposed classes in the suits are all people who bought homes from the builders between
Jan. 1, 2004 and Dec. 31, 2006 and put down 20 percent or more and have been harmed by the high number of "unqualified and high-foreclosure-risk" homeowners in their neighborhoods.
In the case against Irvine-based Standard Pacific, for instance, named plaintiff Riverside County resident James F. Dodaro saw his home in Beaumont's Fairway Canyon development plummet from his $350,000 purchase price to $240,000 after
he put down 60 percent - his life savings - for his mortgage in December 2005, McCune said.
When Dodaro applied for his loan through the company's mortgage arm, he alleges in his suit,
the builder didn't tell him it was selling to investors who would not occupy the homes and people with shaky financial backgrounds. Now, he contends, he's surrounded by foreclosures and short-sales.
McCune said he would attempt to get the class actions certified for California plaintiffs if the
judges overseeing the cases determine a national class isn't warranted.