Bank of American Class-Action Certified: Countrywide via LandSafe used inflated Real Estate Appraisals

First a little background.  On February 6, 2018 a California federal judge certified a nationwide class of borrowers accusing Countrywide Financial Corporation of using inflated real estate appraisals to inflate its loan origination business from 2003 to 2008, overturning successor Bank of America’s claims that borrowers won’t be able to back up their racketeering claims with  proof.

The class-action covers borrowers who received an appraisal from LandSafe Inc. between 2003 to 2008 in connection with a loan that was originated by Countrywide. Countrywide, that owned LandSafe, was acquired by Bank of America in July 2008. LandSafe was sold and is now owned by CoreLogic Inc.

The Plaintiffs have submitted substantial evidence that could be used to prove an alleged RICO scheme existed.  The lead attorney is Roland Tellis who believes the class-action reflects the fact that borrowers were scammed by phony appraisals but never received a refund, despite the fact that there have been massive settlements with regulators and investors.

The suit states that prior to the financial crisis, Countrywide and LandSafe “knowingly, fraudulently, systematically and uniformly” generated false appraisals so Countrywide could close as many home loans as possible.  Borrowers were required to use LandSafe to close, but thought they were paying for an independent, objective appraisal service when the appraisals had a “predetermined value”  to ensure the loans would close rapidly.

The plaintiffs claim they were charged between $300 and $600 each for allegedly corrupt appraisals.  While it is great news that the courts are starting to recognize that a mass-fraud was perpetrated on homeowners, it is unlikely the Appellate court will see the situation the same way as the lower court.  There is also the fact that most class-members receive much in the way of compensation.  The cases typically settle once the numbers get high enough to satisfy the class-action attorneys.

However, there is still a lot of proof that will come out if the case is isn’t settled quickly — damaging proof.  And it is worth noting that the Judge is giving at least some credence to the idea that the entire mortgage meltdown was based upon multiple frauds perpetrated by the banks — not 30 million people waking up one morning and deciding to borrow more than they could afford. I might add that affordability is the responsibility of the lender, not the borrower.  See TILA.  It is presumed by all lending laws that borrowers lack the sophistication to understand the deal they are signing.

Matt Taibbi likened securitization and Goldman Sachs in particular to a vapid squid with many tentacles reaching into the pockets and lives of millions of people. I would extend the analogy further if memory serves, to wit: the squid has three hearts. Appraisal fraud at the instigation of the banks was one of the hearts of the illegal securitization fail scheme — a plan that was, at its heart, nothing more than a Ponzi scheme. They could mollify investors by having them receive monthly payments and even encourage the investors to buy more “mortgage bonds.”
It was the purchases of those bogus securities that fueled everything. When that stopped the entire system collapsed — the hallmark of every Ponzi scheme. And it all happened because of the revolving door between Wall Street and regulators who quickly discovered that by accepting placement inside a regulatory agency, they could emerge within 2 years and take jobs at salaries that were geometrically higher than where they started.
So the people who were working as regulators didn’t want to kill the golden goose, much the same as the appraisers who ultimately caved under pressure from the banks. Of all people the appraisals and the banks knew exactly what was happening. And people who worked in the agencies were loathe to restrain or punish the banks because the banks were their next employer. It was no accident that so many agencies and even the Fed were asleep at the wheel. They were not asleep. They were just biding their time until they left the agency and took a job with the perpetrator of the scheme that they were charged with monitoring.
The banks were flooding the market with money — other people’s money, not their own. I personally witnessed the appraisal fraud in Arizona on several closings where in each case the appraiser came back with an appraisal that pegged the value of the property $20,000 higher than the contract price. In each case the appraiser was given the contract or at least the contract price and the direct or tacit instruction to come back with an appraisal that made the deal appear viable. It wasn’t. Looking at the Case-Schiller Index it is easy at a glance to see how PRICE was driven far above VALUE of property. All housing prices and values were closely related to household income. There was no spike in income for household, but prices were moved ever higher by the banks who were manipulating appraisers.
In 2005 8,000 appraisers petitioned Congress saying that they were being coerced into false appraisals. They either did the appraisal as instructed or they would never see another appraisal job. Congress ignored it. Many appraisers dropped out of the market. The rest were tempted by oversize fees (that in many cases were partially kicked back to the loan originator) or felt compelled to stay in the market because they had nowhere else to go.
The banks were trying all sorts of ways to maximize the amounts of money being moved from the investment sector to the benefit, as it turned out, of themselves and nobody else. The entire time they were driving demand up for loans sold by fraudulent promises from mortgage brokers, who in some cases were convicted felons who had been found guilty of economic crimes. At one point there were 10,000 felons who were registered as salesman for loan products that had no possibility of being sustained.
And it wasn’t that the banks were unaware of the defective loans that violated TILA in multiple ways. They were counting on it. On the way up they sold defective loan products that were never subjected to due diligence by anyone. They, above all others, knew the loans would fail; in fact they were counting on it. They were betting against the performance of the loans by negotiating insurance contracts for either the loans or the “mortgage bonds” or both and selling derivative futures that in many cases were disguised sales of entire loan portfolios that were never owned by the “Seller.”
The big payoff came when the loans and the “mortgage bonds” failed and all sorts of people and entities were caught having to either cough up money or declaring bankruptcy. The AIG insurance [packages were specifically written such that AIG would NOT be subrogated and be able to make claims on the underlying loans nor the “mortgage bonds”].  For a few dollars in premiums the suckers on Wall Street had bought themselves a world of trouble.
Appraisal fraud lies at the heart of the scheme. The illusion of an ever-climbing market kept people refinancing their property, buying overpriced property, and, most importantly buying bogus “mortgage bonds” issued by the underwriter of the bonds utilizing the fictitious name of a REMIC Trust. This was the holy grail of securities underwriting: what if you could sell shares of a nonexistent entity, keep the proceeds, and then sell securities and contracts that derived from the nonexistent value of the Trust?
The average homeowner knows nothing of any of this and reasonably relied upon the representations by sellers of defective loan products; besides reposing trust in such entities just because they appeared to be an institutional lender, borrowers believed the rationale that banks would not lend money they knew they would never collect. That would be true if the banks were making loans. In truth, they were intermediaries with contractual and legal duties to everyone with whom they did business. They breached those duties to everyone in multiple ways but none so glaring as appraisal fraud and kickbacks on fraudulent appraisal fees.

The judge also certified a subclass of Texas borrowers who are bringing an unjust enrichment claim under Texas law and appointed Baron & Budd PC and Hagens Berman Sobol Shapiro LLP to serve as class counsel.

All plaintiffs are represented by Hagens Berman Sobol Shapiro LLP and Baron & Budd PC

The cases are Waldrup v. Countrywide Financial Corp. et al., case number 2:13-cv-08833, and Williams et al. v. Countrywide Financial Corp. et al., case number 2:16-cv-04166, in the U.S. District Court for the Central District of California.

10 Responses

  1. Those of you with Countrywide, check sq.footage on your appraisal. Apparently they padded that too.


  2. Search for the name of the case, and see what comes up as far as the class action. Usually, there is something posted about the class action as to where it is and how to join if you qualify.


  3. How could we part of this class action law suit? Our original lender is Countrywide Home loans Inc. The house was appraised very much above the market value when we re-financed in 2007 through Countrywide Home loans Inc.


  4. How could we part of this class action law suit against B of A?


  5. Reblogged this on California freelance paralegal and commented:
    That is good news that a United States District Court judge has ruled in favor the plaintiffs in this class action. It is common knowledge that appraisal fraud was, and still is, rampant in the real estate industry.


  6. This explains exactly what happened to us in 2004, but it was a broker working for WaMu. We agreed to terms that turned out to be false. No disclosure at the time of signing, so the deception wasn’t discovered until 2012. WaMu, Chase, and the current loan servicer Bayview/M&T bank have all been dealing in our fraudulent mortgage.
    Even a local realtor admitted that ‘all the brokers were doing that [lieing about mortgages and property values] to get sales to go through’.
    We were the ones who had to pay for non-existent value.
    Our trust in banks has also become non-existent.
    What happens next?


  7. This is EXACTLY what I experienced in the purchase of an Arizona Condo. It got sold at Trustee Sale for $9,000 more than My Downpayment!. Originated with Countrywide. I want $70,000 from Angelo Mozillo!


  8. My refi appraisal, in 2006, was almost $100,000 more than I listed it for a couple of months later. Quicken. Immediately passed to Countrywide. Now BAC in house appraisal is $600,000 LESS. Anyone have info on Massachusetts Counter Offer?


  9. Yes, ginned up appraisals were part and parcel of the Great Ponzi Scam and still is.


  10. Great info! In Los Angeles, CA as a whole not simple revolving door but every agency is captured by real estate, banking interests just like OCC. Red stater and corporate Dem or Dem possibly are getting ready to undo all protections from Wall Street squids! Wake up!


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