January 30, 2008
Former Countrywide VP Sues Employer, KB Homes
According to the San Jose Mercury News, Mark Zachary, a former regional vice president of Countrywide Financial Corp has brought suit against the lender for wrongful termination. Zachary received an excellent performance review just three months before he was fired.
Why was he fired? Zachary blew the whistle on the joint venture between KB Homes and Countrywide for fraudulent lending practices - detailing instances in which he was strongly encouraged to inflate appraisals by as much as 6%. It is practices such as this that have left many homeowners owing more than their home is worth, and has helped created the current housing crisis we are experiencing.
Zachary also claims that Countrywide loan officers would advise applicants who were denied a prime loan rate about what income level to claim so they would be approved for sub-prime or no documentation loans.
Naturally, Countrywide denies all of Zachary’s claims. Countrywide lost $1.2B in the third quarter of 2007.
I find it also interesting that KB Homes has declined to comment in this drama. Could they all be afraid this whistle blower is just the tip of the iceberg?
I suspect that many more former loan company employees, executives, and home builder’s employees will be coming forth with their sordid yet true tales in the months to come.
David said:
There was stupidity and fraud at all levels of the recent boom. Just like internet stocks and Enron, just like tulip bulbs in Holland.
Somebody thought it was a brilliant idea to keep interest rates at 1% for too long. Then someone came up with the zero-down. Then the interest-only loans, then the pay-option ARMs, etc etc. And then there were appraisers willing to bump up the prices. And foolish people on the other end willing to buy this junk paper (with the blessing of the repackagers and rating agencies).
Never mind the borrowers making $20K/year claiming $100K/year income so that they could flip the house and make more money they’d actually see in 4-5 years.
We’ve seen fraud and stupidity at every level, and we’ll see another heaping helping over the next couple years, because we’re at best just half-way into the “correction.”
January 30, 2008 9:27 PM
Adam Schwartz said:
That’s all part of capitalism. What’s not part of capitalism is that our government is going to bend over backwards to protect the “victims”, i.e. the banks, the traders, everyone who got rich on these schemes. How is the government going to do it? By taking money from financially responsible people / savers and giving it to the irresponsible people.
January 31, 2008 9:44 AM
Brenda Keener said:
I agree - and it is upsetting that when one honest person steps up to the plate to try to stop the madness, he gets fired for it.
February 7, 2008 11:22 PM
sandra smith said:
Countrywide deserves all of its losses. They have been know to have appraisers over appraise the homes so as to negotiate higher prices. They are the leaders in obtaining and buying subprime loans. They have the most foreclosures out currently. If you want to buy one of their homes you must prequalify with them. Even if you have been approved for a loan. They tell you it is to make sure you qualify but the truth is they want the loan. So these houses sit in the market. Then they cry to the government for a relief. The government should investigate how many of their homes require pre-quals with countrywide. If you don’t go with them and there is a delay they penalize you with steep fees. I am currently in the market and looking for a home. AVOID ANY countrywide homes.
February 8, 2008 5:13 PM