RALEIGH—Last
week, Martha Stewart was in Cary promoting a new line of homes with KB
Home Chairman and CEO, Bruce Karatz. Unfortunately, her partner in this
venture, KB Home, has a long and documented history of poor building
practices and consumer rip-offs.
“While
Martha’s stamp of approval may mean a lot to some consumers, any KB
Home development is suspect,” stated Rob Thompson, consumer advocate
for NC Public Interest Research Group. “The litany of governmental
sanctions and fines against KB Home should cause any consumer to think
twice before buying a KB Home, even one designed by Martha Stewart.”
On
August 3, 2005, the Federal Trade Commission (FTC) fined KB Home $2
million for violating an earlier FTC consent order issued in 1979. The
basis of the 1979 order was a FTC investigation into KB Home that
revealed a pattern of poor construction practices and consumer scams.
U.S. Senator Elizabeth Dole, a FTC commissioner in 1979, listed in a
speech before the National Association of Homebuilders “a gamut of poor
construction practices” and outlined the stipulations of the consent
order, which require KB Home to take better care of homebuyers.
One
of those stipulations was that KB Home cannot include in its warranties
mandatory arbitration of repair disputes that are binding on the
consumer. Additionally, consumers cannot be charged a fee or deposit
for the arbitration. In 1995, the DOJ filed a complaint in U.S.
District Court alleging that KB Home violated this and other provisions
of the 1979 consent order. KB Home paid $595,000 in civil penalties as
a result of the complaint. And then again, in 2005, the FTC has fined
KB Homes $2 million dollars for violating the same 1979 consent order.
“Time
after time, KB Home has violated FTC orders that give consumers the
ability to protect their most important investments – their homes,”
said Thompson.
Earlier
in 2005, the Department of Housing and Urban Development (HUD) fined KB
Home Mortgage Company $3.2 million for predatory mortgage practices,
such as “approving loans to borrowers who were not eligible; approving
loans based on overstated or incorrect income;” and, “failing to
include all of borrowers’ debts” when approving loans. This is the
largest amount ever collected in the 30 year history of HUD’s Mortgage
Review Board.
“Predatory
mortgage lending is an unethical practice that often results in home
foreclosures and vicious cycles of debt for consumers,” states
Thompson. “The bottom line is this – if you’re dealing with KB Home,
buyer beware.
