California homeowners win a round against big builders

A group of 19 California homeowners who bought their homes between 2004 and 2006 -- each with a 20% or more down payment -- won the right to sue D.R. Horton, Richmond American, Shea Homes, Lennar Homes and other production home builders for devaluing their properties with risky lending practices. 

According to an article in Courthouse News Service, a federal appeals court in San Francisco overturned a lower court’s decision, paving the way for a class action lawsuit over whether developers of new home communities marketed homes to high-risk buyers and then sold houses to unqualified individuals and investors prone to foreclosure.

The end result, according to the plaintiffs, are neighborhoods blighted by foreclosures, empty houses and increased crime. Home values have also plummeted. 

The three-judge appellate panel unanimously agreed that the plaintiffs would likely not have purchased their homes had they known the developers’ lending practices. Although they found no causal link between the defendants’ actions and the decreased value of the homes, the ruling allowed the plaintiffs to amend their claims to provide more evidence of a connection between the two events.