On a weekday afternoon in late April, Kyle Lagow sits in the living room of his home in a tony north Plano neighborhood wearing a blue T-shirt and orange jogging shorts, the casual attire of someone who finds himself unwillingly unemployed. Lagow is tall, with a physique that harks back to his days playing tight end for Southern Methodist University, an avocation and a school he says he gave up on too easily. He later enrolled at the University of Mary Hardin–Baylor before giving up on that too, three hours short of an undergraduate degree in general business studies. Despite his lack of a bachelor’s degree, he was admitted to law school, but didn’t finish that either. So it’s something of a surprise that after Lagow took it upon himself ten years ago to warn people about the impending implosion of the mortgage industry, he didn’t give up, no matter how hard the industry pushed back at him.

Lagow’s strange odyssey into the mortgage crisis began in 2004, when he joined LandSafe, a Plano-based appraisal subsidiary of Countrywide Financial, then the nation’s largest mortgage lender. Lagow, who had been running his own appraisal business for fourteen years, was tasked with hiring and training appraisers to determine whether properties were worth the amount that Countrywide was lending against them. 

Home appraisals are, essentially, audits on home prices. They’re designed to ensure that the buyer and the seller get a fair price. For that reason, it’s important that appraisers remain neutral. In a real estate bubble, though, appraisers are often pushed to fudge the numbers. They may be asked to simply okay the amount of the mortgage or to factor in the potential for home values to rise. In Texas we saw this sort of aggressive approach during the savings and loan crisis of the eighties. At LandSafe, Lagow quickly began noticing a pattern in which appraisers were pressured to meet the often-inflated values that Countrywide’s lenders were placing on mortgages.  

In 2005 Countrywide began amping up its lending by loosening guidelines, underwriting riskier loans, and hiding a rising default rate from investors. If appraisers determined that homes weren’t worth as much as Countrywide was claiming, they were told to take another look. Some were encouraged to rubber-stamp their reviews. One, according to Lagow, handled more than four hundred cases in a single month, far too many to carefully assess each property’s value. Another appraiser, Lagow discovered, had scheduled property inspections one minute apart. “It became obvious that in certain markets, we were driving values up,” Lagow says. “We were employed in a scheme of defrauding investors.”

Lagow encouraged his appraisers to resist the pressure, but it only intensified. When Countrywide set up a joint venture with KB Home, the publicly traded homebuilder told Lagow that it wouldn’t be using his team. “If anybody squawked, they were punished,” Lagow says. Sometimes his employees were removed from Countrywide’s list of approved appraisers. Other times, he says, LandSafe filed complaints against his appraisers with the state licensing board. 

In 2005 Lagow got a tip that improper appraisals were causing foreclosures in a Houston-area neighborhood built by KB Home and underwritten by Countrywide. He decided to see for himself and wound up sitting in his car, staring down a row of suburban homes. He watched one family make a final trip from their doorstep to their car, loading up their belongings. Many of the homes, all built less than a year earlier, were already in foreclosure. As Lagow drove away, he vowed to do something about what he had seen. “We tore apart the very fabric of the American dream,” he says. 

Lagow sent dozens of emails to Countrywide executives, warning them that they were possibly committing RICO violations by selling products to investors who didn’t know what they were buying. His bosses didn’t act on his warnings, but that doesn’t mean they weren’t paying attention to what he was doing. “Being a whistleblower isn’t easy,” says Philip Hilder, a Houston attorney who represented the Enron whistleblower, Sherron Watkins. “There are very powerful forces that will do anything to discredit and discourage the whistleblower from coming forward or continuing.” Lagow found out just how powerful those forces could be. Over the next few years, with no explanation, his territory shrank. Instead of being responsible for half the country, he eventually oversaw only Texas, Oklahoma, and part of New Mexico. Some of his co-workers openly mocked him as “the black-helicopter guy.” 

Frustrated, Lagow emailed and talked with Countrywide’s founder and CEO, Angelo Mozilo, but he never got a satisfactory response. He still finds it baffling that Mozilo, whom he admired, ignored his concerns. “I didn’t want to believe that a guy would spend forty-some years of his life building up a company to potentially trash it,” Lagow says. “To this day, I’d like to believe that Mozilo really didn’t know.” He pauses for a moment before he admits, “That sounds a little far-fetched.” 

Lagow knew he was putting his career in danger, but like many budding whistleblowers, he still believed that the company would change if the right people knew what was going on. That’s not what happened. In October 2008 Lagow’s world was shaken when he was diagnosed with thyroid cancer. A few weeks later, as he was still reeling from the news, his boss told him he was being let go, offering only the oblique explanation that the company had decided to move in a different direction. He was offered a severance package and told that Countrywide would put him on a list of approved independent appraisers and funnel business to him, as his health and treatment allowed. He accepted the deal and waited for appraisal requests to come in; six months later, he hadn’t gotten a single one. He says the company informed him in a one-line letter that it had decided against putting him on the list after all. “At that point, I’m broke,” he says. 

Lagow’s wife, DeAnn, still had her job as a middle school teacher, but her income wasn’t enough to support their five children. He tried to restart his independent appraisal business, but he found that because he was no longer on his former employer’s list of recommended appraisers, people were reluctant to work with him. “My options at that point were really limited,” he says. “I fought because I didn’t have any choice.”

In 2009 he was combing the Internet for stories on Countrywide when he ran across a mention of a 2008 class-action lawsuit filed against the company on behalf of West Coast homeowners who said they had been deceived about the terms of their loans. With little else to do, Lagow called the attorney in charge and offered thousands of documents and emails he had gathered. The case eventually fell apart, but the attorney suggested Lagow pursue a whistleblower case, which led to a meeting with Justice Department lawyers.   

Once a whistleblower case is filed, though, it becomes shrouded in secrecy. Lagow had no idea what was happening. “There’s always that fear,” says Shayne Stevenson, one of his attorneys. “You could sacrifice your career and wind up with nothing.”

Lagow couldn’t tell anyone much about what he was doing. “It was a tough time,” he says. “While I was sitting in a meeting with the Department of Justice in New York, my wife called and said, ‘The electricity’s just been cut off.’ ” At one point their mortgage company tried to kick them out of their house. A suspected gas leak that the family couldn’t afford to fix forced them to go without hot water for a year. The stress was wearing everyone down. 

On February 9, 2012, three years after Lagow first went to the government, the feds announced that they had reached a $1 billion settlement with Bank of America, which had bought Countrywide in 2008. The bank admitted no wrongdoing. The settlement was packaged with six others involving big banks, all related to the mortgage meltdown and totaling $25 billion, the largest civil judgment ever obtained by the feds. (A Bank of America spokesman declined to comment on the settlement or any of Lagow’s allegations.) 

Lagow’s reward for all his hard work and suffering? A neat $14.5 million payment under the False Claims Act, a Civil War–era federal law that rewards whistleblowers who report fraud against the government. Lagow might have been able to recover significantly more, but rather than bargain, he accepted the government’s offer in the hopes that more of the $1 billion could be returned to Countrywide clients who had lost their homes. “He was not unaware that the False Claims Act could result in a bounty,” Stevenson says. “But that was not his motivation when he first contacted us. He could have argued for more, but he didn’t because it was always important to him that money went back to the homeowners who were burned.” 

After the settlement, Lagow moved his family into a new home; electricity and hot water are no longer a problem. His health has improved too; following two rounds of surgery, he’s been cancer-free for seven years. “I never thought it was going to be this good,” he says. There were times when the case seemed to be dragging on forever, when he would have been happy with a hundred grand or a million dollars, so long as the case was finally over and he could pay his bills. At the same time, he realizes that the stigma of being a whistleblower—in most corporate cultures, it’s seen as insubordination— may mean that the settlement could be all he earns for the rest of his life, at least in his chosen profession. “I thought that when things became public it would be easier to get a job,” he says. That hasn’t been the case. He still applies for work occasionally, but when the subject of his last job comes up, the discussions tend to end quickly. He spends most of his time managing his investments and traveling with his wife, who is now retired. 

But the settlement wasn’t the end of his saga. Last year, Bank of America agreed to pay another $16.65 billion civil settlement, some of it stemming from claims that it continued using improper appraisals even after Lagow filed his lawsuit. The whistleblower in that case, Robert Madsen, received a $56 million payout—far more than Lagow did. Under the False Claims Act, if one whistleblower raises fraud claims against a company and a second whistleblower later raises similar claims against the same company, the first one can argue that he deserves a portion of any subsequent settlements. Lagow went after part of Madsen’s payout and settled on an amount in March, though he can’t discuss the terms of the agreement. 

Fourteen and half million dollars is a lot of money, of course, but to put it in perspective, it’s about a third of what Mozilo received in severance pay after Countrywide was sold, in 2008. And it can’t erase the years that Lagow and his family spent living on the edge of penury. But the man who once couldn’t complete anything has no misgivings about his stubborn refusal to veer from the path he set out on years ago. “If you look back on your life with regrets,” he says, “you must be in prison.”