The legal tug-of-war between Quicken Loans, the nation’s largest Federal Housing Administration-backed mortgage lender, and the U.S. government reached a new level Thursday with the Justice Department filing a lawsuit against the lender over the alleged improper underwriting of FHA loans.
The action follows Quicken’s filing of a lawsuit last week against Justice, alleging “a political agenda under which the DOJ is ‘investigating’ and pressuring large, high-profile lenders into paying nine- and 10-figure sums and publicly ‘admitting’ wrongdoing.”
In the government’s lawsuit Thursday, Justice contends the Quicken encouraged its employees to disregard FHA rules and say that mortgages met the guidelines when they actually did not. In some cases, Quicken got appraisers to inflate the value of homes so it could approve the loans, and managers sometimes let underwriters break FHA rules to approve loans, the DOJ alleges.
The time period during which this activity occurred was September 2007 through December 2011, Justice alleges.
The FHA has already paid millions of dollars in insurance claims on the improperly underwritten loans, according to the complaint. The civil action also states that were additional loans that had become at least 60 days delinquent and could result in further claims.
Quicken Quick to Respond
Quicken was quick to blast the DOJ complaint:
Quicken states: “The complaint filed today is riddled with inaccurate and twisted conclusions from fragments of a handful of emails cherry-picked from 85,000 documents that the DOJ subpoenaed. Worse than that, the DOJ appears to be basing their entire case on a handful of out-of-context email conversations skimmed from the communication between Quicken Loans employees. These conversations relate to a miniscule number of loans out of the nearly 250,000 FHA mortgages the company has closed over the past seven years.”
The FHA ranks Quicken Loans as the highest quality (lowest default rate) lender of any large FHA originator in the United States, Quicken stated in Thursday’s response to the DOJ action. Quicken said the FHA mortgages it originated are projected to “generate billions in profits (net of claims) for the government from the insurance premiums on the $40 billion in FHA volume the company has closed since 2007.”
Last week, Quicken filed suit in Federal District Court against the United States Department of Justice and the Department of Housing and Urban Development. The company says it was left with no alternative after the DOJ demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action.
Said Quicken Loans CEO Bill Emerson: “No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its leadership from doing the right thing. We will stand in defense of our impeccable reputation established by thousands of hard-working ethical team members over our 30-year history.”