Hagens Berman Sobol Shapiro: Pulte Homes Violated State Law in Manipulating Home Sales Prices, Lawsuit Claims
SAN FRANCISCO – (PRNewswire) A California homeowner filed a class-action lawsuit in the U.S. District Court in Northern California claiming Pulte Homes Corporation engaged in a fraudulent scheme to artificially prop up sales and home sale prices through convoluted control of the home sale process. The lawsuit claims Pulte's business model provides 'one-stop shopping' for homebuyers, as the company controls the sale, financing, ancillary settlement services and appraisals in the home buying process.
The suit contends in order to sell homes at above-market values, Pulte placed buyers in loans that they could not afford while settlement and appraisal arms abandoned any presumed neutrality and took whatever steps necessary to ensure home sales closed at prices demanded by Pulte.
The complaint includes a quote from William J. Pulte, stating that in 2005, "In most of these cases, buyers have no idea how they're going to pay." Despite the CEO's cautionary statement, the suit alleges Pulte lured unqualified buyers by promising them large discounts if they used the company's mortgage arm, Pulte Mortgage.
"Pulte created an amazing opportunity for itself by closely manipulating all involved parties in the home sale process," said Steve Berman, lead attorney and managing partner at HBSS. "Pulte created a micro-environment inside the marketplace, where it could rig, falsify and inflate reports and pricing to its hearts content and no one had any idea what was happening."
"In my client's case the 'discount' offered was phony because it reduced the home's price from an already inflated number that was more than $50,000 higher than the appraised value," Berman continued.
Pulte pushed homeowners into dangerous loans and then quickly sold those loans on the secondary market immediately after closing for additional profits, the suit states. These practices created 'toxic subdivisions' populated with homes built and financed at inflated values, owned by homeowners who did not qualify for and could not service their loans, the suit continues.
The result of Pulte's actions to homeowners and the market was catastrophic resulting in foreclosures, a steep decline in home values, a loss of buyer's down payments, loss of mortgage payments and ruined credit, the suit states.
"Pulte set homeowners and itself up for failure when it thought it could curtail the housing crisis and maintain inflated home sales," said Berman. "The company systemically ruined homeowners purely in the pursuit of profits. This scheme transformed the company from a business to a gambling venture and many homeowners have wrongly suffered significant losses."
The suit claims Pulte allowed and encouraged buyers to provide inflated stated and verified income as part of the loan process, did not require substantial down payments, provided underwriting on sub-prime loans for buyers with bad credit, financed buyers in adjustable interest-only loans and more.
"Based on what we have seen we expect the case to broaden to pick up toxic neighborhoods in both Nevada and Arizona," Berman noted.