KB Countrywide Mortgages

Countrywide was the single largest source of financing for home builders’ mortgage operations. Countrywide had servicing, marketing, and secondary market relationships with the nation’s largest home builders including KB Homes, Toll Brothers, NVR, Ryland Homes, Beazer Homes, and Lennar.

Through Countrywide, KB dramatically increased its use of the high risk and high cost mortgages that helped create the mortgage crisis.

• 37.5% of Countrywide KB’s home-purchase mortgages included a “piggyback” mortgage.
• 44% of Countrywide KB’s second lien purchase mortgages were subprime in 2006.
• Countrywide KB had a 57% homebuilder mortgage capture rate in 2006.

When the Johnsons wanted to buy a KB home that was priced at about $394,000, they applied for a loan through their Credit Union, which denied the loan because their appraisal said the house was worth only $351,000. The Credit Union’s appraisers refused to use two of the sales that KB had submitted as comparables because the properties had gross living area more than twenty percent higher than the subject property. The appraiser noted that “[T]he inclusion of either or both of these sales…would be inappropriate and may give the impression that the appraisal’s purpose was to target a predetermined value range.” KB Home Sales referred the couple to Countrywide which came back with an appraised value of $394,000. The Countrywide appraisal used three different sales from the credit union. One of the sales was the property that the credit union appraiser had refused to use. Another of the sales was 3.75 miles from the Johnson’s property (all of the credit union’s properties were less than 0.75 miles from the Johnsons). Countrywide gave Mr. and Mrs. Johnson a first mortgage for $315,000 and a second mortgage for $78,000. Now the couple owes significantly more than their home is worth. Maricopa County recently lowered the home’s assessed value from $269,000 to $187,200.