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StumbleHomebuilders Pulte and Lennar sue AG over hiring of law firm to probe lending
In this file photo, home building continued in Anthem in late 2008 and in other Pulte Homes and Del Webb communities in the valley.
Published Thursday, March 11, 2010 | 9:26 a.m.
Updated Thursday, March 11, 2010 | 11:54 a.m.
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Home building giants Pulte Homes Inc. and Lennar Corp. are suing Nevada Attorney General Catherine Cortez Masto, charging she improperly hired a union-affiliated law firm to investigate predatory mortgage lending allegations against the companies.
In complaints filed Monday in U.S. District Court for the District of Columbia, the homebuilders say Cortez Masto and Arizona Attorney General Terry Goddard separately hired the law firm Cohen Milstein Sellers & Toll PLLC in violation of the builders' due process rights.
"The Cohen Milstein lawyers conducting these investigations represent a labor union, the Laborers’ International Union of North America (LIUNA), that is waging an extensive campaign against Pulte consisting of activities, including potentially illegal activities, designed to damage Pulte’s business and harm its shareholders. The purpose of this campaign against Pulte and other homebuilders is to coerce Pulte and other homebuilders into forcing their subcontractors to sign union agreements," charged the lawsuit filed by Pulte, which has built in the Las Vegas area under the Pulte, Del Webb and Centex brands.
"The rules of professional conduct prohibit Cohen Milstein from representing Arizona and Nevada in this matter while also representing LIUNA in matters adverse to Pulte," Pulte charged in its lawsuit.
The homebuilders also complain that the Arizona and Nevada attorneys general have retained Cohen Milstein on an impermissible contingency fee basis, giving them an inappropriate profit interest in the outcome of the investigations.
Lennar complained that the Cohen Milstein attorneys have been deputized by the state of Nevada to conduct the investigation, even though "constitutional due process prohibits state and federal government attorneys from having a financial interest in the outcome of the cases which they prosecute."
"The attorney general has yet to inform Lennar what authority allows the attorney general to hire outside counsel to conduct this investigation on behalf of the state of Nevada," charged Miami-based Lennar, which in Las Vegas has built under the Lennar, Greystone and U.S. Home Corp. brands.
The Nevada Attorney General's office today denied that the law firm at issue represents any private litigant or union in any case against Pulte and Lennar; and asserted it has the right to hire outside counsel to assist in its investigation of the predatory lending allegations.
"The investigation by our office results from the receipt of several complaints from Nevada residents against the companies raising serious allegations against Pulte and Lennar that they engaged in deceptive predatory lending practices against Nevada residents including falsifying and inflating income on loan applications; failure to disclose loan terms; changing agreed upon terms at the last minute without the buyer’s knowledge or consent; high interest ARM loans for people who requested and qualified for lower interest fixed rate loans; hidden balloon payments; and requiring people with good credit and down payments to take out 80/20 second mortgages at high interest rates," the Attorney General's office said in a statement.
The lawsuits indicate the Arizona and Nevada investigations were launched after LIUNA presented evidence to the attorneys general it said showed that during the housing boom, the builders harmed home buyers by inducing them into purchasing new homes at inflated values and with unaffordable mortgages.
During a September news conference organized by the union, a group of home buyers asked the Nevada Attorney General's office to take action on complaints alleging deceptive sales and lending practices.
A union press release said Constance Consentino, one of the homebuyers filing complaints, purchased a Pulte home in Las Vegas in 2007 with a 20-percent down payment and a good credit score. The union alleged Pulte inflated the home price, used incentives to steer her to Pulte’s lending affiliate and failed to disclose important mortgage terms, particularly that the interest rate could increase after seven years.
In May, LIUNA was involved in the filing of a lawsuit with similar allegations against KB Home and Countrywide Financial. That suit claimed they inflated home values and appraisals in Nevada and Arizona.
The union has also been critical of lending associated with other homebuilders including D.R. Horton, Beazer, Ryland and Richmond American.
Countrywide, now owned by Bank of America; Pulte, based in Bloomfield Hills, Mich.; KB Home, Lennar and the other homebuilders have denied allegations of improper lending activities.
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Interesting that we are going to waste Nevada taxpayer dollars in light of this;
http://finance.alphatrade.com/story/2010...
Hey Pulte, instead of whining about how hard life is, how about finishing the disgraceful parts of Horizon Ridge? You know, where you tore up the foothills, and then just left in a day. You made a mess, and we have to look at it daily.
Hope you lose the case. The City of Henderson public loafers should be ashamed, too.
Another Masto mess....
Are there any democrats in this state not in bed with the unions? This is ridiculous.
If I were incharge I would table this lawsuit for ten years
Homes are still barely affordable today for most Vegas workers. When interest rates rise...and they will....they will become even less afordable. Compound that with the increase in costs for union labor? Whoa there will be problem. So let me guess...if pulte and lennar agree to a union contract then this lawsuit goes away?
Hey longtimevegasres how about actually checking the prices of homes in Las Vegas www.Realtor.com before spouting off non sense. Home in Las Vegas can be had for $25,000-$60,000 right now less than homes in Arkansas.
Everyone who wants a house in Vegas can have one if they have the income and credit history to support it. Great prices all over the Valley!
I read the artical and thought it is about time. Builders have forced their buyers to their own lender for years. The incentive $$ to use their lender could have in many cases been given by any lender using the same higher interest rate the buyer ended up with. Then on top of that there was not an impartial appraisal done to see what the home was really worth.
Why are we giving out housing permits in the valley when there are 40,000 used homes for sale?
Why were these home builders selling homes for 300,000 plus 3 yrs ago and are now selling the same plan on the same lots for 'in the upper 100s?
What will these 'upper 100s' and their neighborhoods look like in 20 yrs?
Why do the non-union built homes cost the same as the same home that is union built?
Why don't the non-union builders pass on their savings in labor costs to the buyer?
Why doesn't the city raise the property taxes on these huge empty lots that are scattered all over the valley high enough so they will either be utilized or re-sold to someone who will develope them?
It makes no sense to bypass thousands of acres to extend city services and streets when there are services already at these empty sites!
Hey Las Vegas 2009. You are an idiot. Stated income loans are long gone. You actually have to PROVE your income now. Go figure. Also, read my post before commenting. Homes are barely affordable today and when rates go up...they will not longer be affordable.
Are you a residential broker or something...probably.
It's a good thing Catherine has good looks, 'cause she missed out on the brains part.
longtimevegasres=shorttimeinschool can you read and comprehend at all?
Anyone can afford a home at $25,000-$60,000 your payment from $95-$500 a month. Anyone with a job can afford that.
LasVegas2009=year late = jackass.
So you are a realtor huh.... I don't know of any 25-65k homes for sale. Probably in your neighborhood. Or are you the guy that dreams of being a slumlord and trying to flip those trashy condos for profit. Good luck moron.
Hey, if one of you are in the mortgage loan business could you please help me understand this?
If ARM loans are based on interest rates, and interest rates have not increased in years, why did the payments go up?
Also, why is BOA still advertising ARM loans if they are so bad?
Mortgage Lender is exactly correct about the incestuous relationship between homebuilders and new home tract lenders, especially in the days of Wall Street's and Europe's voracious appetite for Residential Mortgage Backed Securities. The Attorney General also needs to look at the relationships between Pardee and Wells Fargo and American West and Deutsche Bank as well. Quite obviously there are/were other homebuilders operating in Las Vegas engaging in the same conduct, so in some cases it is unfair to single out Pulte and Lennar. That how Cortez Masto & Co. inadvertently blew their prosecution of the Tire Works case. Selective prosecution.
As to this counter-lawsuit by Lennar and Pulte, we'll see what happens. The cigarette companies tried the same kind of maneuver when the States Attorneys General hired contingency fee plaintiffs lawyers to litigate against the cigarette companies more than 10 years ago. The objections expressed in the Pulte/Lennar lawsuit today are the same as those expressed at the beginning of the successful cigarette litigation which produced billions of dollars in settlements for the states, because the cigarette companies were afraid to go to trial.
Same thuggish non-disclosure by the defendants in both cases too.
I suspect this counter-lawsuit has been filed (1) to gin up money for Pulte/Lennar's lawyers who "advised" it, (2) to try to scare Cortez Masto into not proceeding and (3) to prevent other States Attorneys General from joining the case against Pulte and Lennar if it really gets rolling against Pulte and Lennar as defendants.
The real problem for Cortez Masto is that the Legislature and Governor have repeatedly cut her budget for consumer protection litigation, this is a case far too complex for her office to handle in house, and thus she needs the contingency fee plaintiffs' lawyers to staff the case.
Obviously, everyone who bought a new home in 2001 and afterwards wishes AG Cortez Masto every success.
Home builders love nothing more than rock bottom, cheap labor. That's their bread and butter.
They will search far and wide to find workers willing to perform their jobs at the lowest wage and minimum safety while keeping their mouth shut with no complaints. For those reasons and many others US home builders looked to the cheap-labor gold mine down south and discreetly encouraged undocumented workers from Mexico to slip across the border illegally and be rewarded with a job that pays them ten times what they could earn in their home country.
While many US industries shipped their manufacturing jobs overseas home builders had to either bring the low-cost workers to the US or pay a living wage to Americans.
Those are some of the main reasons Pulte and other companies absolutely hate organized labor.
longtimevegasres,
Do a bit of research.
http://www.realtor.com/realestateandhome...
Over 2500 homes under $65,000 today. More to come since B of A is releasing 500 homes a month from their inventory.
The big picture today is the Trial of KB Homes xCEO - Bruce Karatz (Las Vegas Sun where are you?) Bruce Karatz takes the money and run, ignores your customers and keeps building those Lemons. Just Google "KB Home Sucks" to see the legacy of Bruce Karatz, Jeffrey Mezger, Gary A. Ray, Ron Burkle, Stephen Bollenbach, Leslie Moonves, Robert L. Johnson and the rest of KB's Board of Directors. All made big profits and did not comply with the FTC compliance order to fix these Lemons in a timely fashion. Does KB Home and big builders run the Government? Only four stories this week on Karatz? On one of the biggest tests for Federal Prosecutors in the last 25 years. KB's board sits on ABC/Disney, United Press, CBS, CBS/MarketWatch/WSJ where is this news story being covered by them? At KB Home "$hare price" is more important than "We the People! Our consumer rights are non existent. http://www.akbhomesucks.com
There are many sites complaining about home builders. Many times they are union driven.
thanks Vegaslee....How many are left with the Condos are taken out?...and is BofA REALLY releasing 500 homes per month? If they start flooding the market with homes, then what do you think will happen to home values? Doesn't seem like a good time to buy to me.
Also, if they was any marketability to those 2500+ homes, why are they still on the market? Even smart investors are obviously shying away buying those. Check out apartment vacancy...record high. Vegas is overbuilt and we will not see stabilization until the job market improves and people want to move here again.
Vegaslee and LasVegas 2009. If these "houses" are so affordable, why is there a record amount of homes for sale?? Is it because they are so affordable? Or is it because 80% of Vegas homeowners and under water? So..nobody is able to move...and there is nobody moving here to buy all those "great deals".
You are both either realtors or in the mortgage business right. Nobody is drinking the kool-aid anymore.
these builder deserve what they get
Counter-lawsuit by Lennar and Pulte! Lennar kept my $7,000 reservation check in Tierra Bella and Pulte ruined my life as it was. First of all my house in Escala became toxic mold infested and forced us to evacuate. Then baby was born with permanent bodily harm in Las Vegas hotel. Of course legally our Pulte homes Inc. house was not livable while Pulte inflated prices in our subdivision and failed to fix our existing house. Pulte took away our good credit, baby's health and any possibily to sell our home with profit during housing boom.