Ex-Worker at Countrywide-KB Home Lending Unit Sues Over Firing
LOS ANGELES (AP) -- A former employee of Countrywide KB Home Loans has filed a lawsuit claiming he was wrongly fired after he reported fraudulent lending practices to superiors and refused to approve mortgages for unqualified applicants.
The federal lawsuit was brought by Mark Zachary, a regional vice president and manager of the Countrywide KB Home Loans division in Houston.
He seeks unspecified compensatory and punitive damages against the joint venture of mortgage lender Countrywide Financial Corp. and builder KB Home.
The lending practices of Countrywide Financial and other mortgage companies have come under scrutiny amid a surge in home loan defaults among borrowers with poor credit histories. On Tuesday, Countrywide reported a fourth-quarter loss of $422 million after losing $1.2 billion in 2007's third quarter.
In the suit, Zachary contended he was given an excellent performance review last February then fired three months later after he blew the whistle on fellow employees and outlined instances in which appraisers were "being strongly encouraged to inflate homes' appraised value by as much as 6 percent."
That resulted in buyers owing more than their home was worth, Zachary claimed in the lawsuit filed Jan. 17 in U.S. District Court in the Southern District of Texas.
Los Angeles-based KB Home declined to comment because the litigation is pending.
Calabasas based Countrywide Financial said in a statement that it investigated each of Zachary's claims and found them to be meritless.
"Countrywide has policies and procedures in place that aim to prevent the type of activities Mr. Zachary is alleging," the company said.
The lender also denied that Zachary was fired due to the allegations he made in his lawsuit.
Among other allegations, Zachary claims Countrywide loan officers would advise applicants who were denied a prime-rate loan about what income level they should report so they could be approved for no-documentation or stated-income subprime loans.
Zachary said he was fired after he failed to meet a quota for new loan approvals because he refused to clear unqualified applicants, according to the complaint.
Countrywide shares rose 16 cents, or 2.5 percent, to $6.47 Wednesday. Shares of KB fell $1, or 3.8 percent, to $25.18.