MANATEE -- Upon learning of issues inside the Willowbrook condo community in East Manatee, a former Dallas home appraiser is imploring Florida government officials to investigate possible fraudulent practices by national home builder KB Home.
Kyle Lagow, who worked for Landsafe Inc., a company owned by Countrywide Financial that provided loans for KB Home sales, recently received a $14.5 million settlement for his role in a whistleblower lawsuit involving KB Home. The case, brought by Seattle-based law firm Hagens Berman Sobol Shapiro, alleged fraudulent practices were committed by Countrywide Financial, which was acquired by Bank of America between 2004 and 2008.
The suit claimed Countrywide conspired with Landsafe and KB Home to inflate the appraised value of homes to increase loans to homebuyers. The allegations sparked an investigation that resulted in a $1 billion settlement between the Department of Justice and Bank of America.
The lawsuit also claimed home prices for 19,000 homes built by KB Home in the Southeast between 2006 and 2008 were inflated by a total of $600 million.
Willowbrook was KB Home's first venture into Manatee. Construction began in 2005 and sales started in 2006.
"In my opinion, in many cases the values were manipulated, the homeowners are unnecessarily upside down on their value, the statutes will pass, and the homeowners will be saddled with a higher than necessary debt," Lagow told the Herald via email.
The thought of unfair closing prices on their homes is another blow to the 80 or so residents in the 272-unit community in East Manatee that have construction issues with their homes. The construction problems have led
to water damage, floor damage and signs of mold due to water intrusion on the second and third floor balconies and inside their homes.
"It just adds to the debacle," said Don Koehler, a Willowbrook resident. "In this process, every corner we turn, they try to cover something up or we hit a dead end. They've created the perfect storm."
Over the last two months, Manatee County building inspectors have inspected close to 80 balconies in the condominium community and have ruled about 40 unsafe.
Reports have surfaced of two whistleblower lawsuits against KB Home that alleged the home builder knew of structural defects in Willowbrook, but sold the units anyway. Both lawsuits have been settled.
On Tuesday, Manatee County commissioners will hear a report from county building officials on whether the county's building inspection system worked properly.
The county commission public meeting begins at 9 a.m.
Several residents have asked KB Home to buy back their units, but the multi-billion dollar company has shown no interest in doing so. KB Home is standing by its warranty and weeks ago reached an agreement with the Willowbrook Condominium Association to allow a third party to make repairs at the expense of KB Home. Repairs have already begun inside the community, according to Cara Kane, spokeswoman for KB Home's Central Florida division.
At Landsafe, an appraisal company owned by Countrywide, Lagow witnessed violations of Federal Housing Administration laws.
He also claimed KB Home manipulated final home sales prices and used intimidation and blacklisting tactics toward appraisers that didn't inflate prices.
Manatee County is proposing state legislation that would essentially void mandatory arbitration clauses in contracts for the sale and construction of homes.
Willowbrook residents said arbitration clauses were included in their contracts with KB Home, prohibiting them from suing the developer for poor construction.
In addition, State Sen. Mike Bennett requested the Florida Attorney General look into possible fraudulent practices by KB Home.
The Attorney General's office has since referred complaints against KB Home to the Florida Department of Business and Professional Regulations.
"Someone has to have some sort of backbone and take this and run with it," Koehler said. "The homeowners are exhausted."