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Govt & One of Nation's Largest Mortgage Lenders Sue Each Other

blog.credit.com | April 29, 2015

By Christine DiGangi

The U.S. government filed a lawsuit against Quicken Loans, one of the nation’s largest mortgage lenders, for allegedly improperly originating and underwriting Federal Housing Administration (FHA) home loans, the Department of Justice announced April 23.

The Detroit-based lender closed $140 billion in mortgages from 2013 through 2014 and is the nation’s largest FHA mortgage lender, according to the company’s website. It is also the nation’s largest non-bank lender, in terms of mortgage origination.

The FHA, part of the U.S. Department of Housing and Urban Development (HUD), insures home loans with lower down payments, lower closing costs and lower applicant credit scores than with conventional mortgages, allowing more people (particularly first-time homeowners) the opportunity to buy a house. If the borrower defaults on the loan, the lender may make a claim to FHA insurance to cover the losses on the loan, and during the onslaught of loan defaults during the mortgage crisis a few years ago, that insurance fund was stretched thin.

The government claims that from September 2007 to December 2011, Quicken jeopardized the FHA insurance program by submitting claims for “hundreds of improperly underwritten FHA-insured loans.” The lawsuit alleges the company created a culture where employees were encouraged to disregard FHA rules and falsify proof of compliance with underwriting requirements in order to cash in on FHA mortgage insurance.

Quicken actually filed a lawsuit against the Department of Justice first, saying that “the DOJ demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action,” according to the lender’s April 17 announcement of the lawsuit. In a statement released in response to the DOJ’s lawsuit a week later, Quicken said the complaint is “riddled with inaccurate and twisted conclusions,” based on a small portion of emails the lender turned over to the department.

“[T]he 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 [sic] number of loans out of the nearly 250,000 FHA mortgages the company has closed over the past seven years,” Quicken’s statement says.

 

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