Quicken sues Justice Department over FHA secured loan investigation

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Going on the offensive, Quicken Loans filed a lawsuit against two federal agencies examining its lending practices, saying their three-year investigation is truly a muscular attempt to secure a big settlement from the Detroit-based company.

Quicken filed his lawsuit late last week against the Department of Justice and the US Department of Housing and Urban Development, asking a court to find that its lending practices involving FHA-insured loans were appropriate.

“Quicken Loans appears to be one of the targets (due to its large size) of a political program in which the DOJ is ‘investigating’ and pressuring the big, high-profile lenders to pay sums to nine and 10 digits and that they “publicly admit”, including by conceding that the lenders had made “false statements”, “says the lawsuit.

Although this is a long legal shot, the lawsuit demonstrates Quicken’s penchant for aggressively defending his reputation. It’s rare for companies to take preventative lawsuits against the government, said Matthew Schwartz, a former deputy U.S. attorney who is now a partner at New York-based Boies, Schiller & Flexner.

“Sometimes the targets of investigations go on the offensive, including filing lawsuits, but nothing like that to my knowledge,” he said, adding that the lawsuit could be a good public relations stunt. “It’s obviously Quicken’s attempt to frame what’s going on here.”

Quicken, founded by billionaire Dan Gilbert, says it’s the nation’s largest originator of Federal Housing Administration-backed loans. In recent fiscal quarters, Quicken has been the nation’s second-largest lender for direct-to-consumer mortgages, although its total volume, like that of all major mortgage lenders, has declined since the refinancing boom. started to fade in mid-2013.

A spokesperson for Quicken Loans did not respond to requests for comment on Monday.

The lawsuit says justice and the HUD began investigating Quicken’s treatment of FHA insured loans about three years ago, and 55 “chosen” examples that were problematic out of more than 246,000 Quickens created in 2007- 11.

Dan Gilbert is the founder and president of Quicken Loans.  Photo taken in April 2015

Lawsuit Says Justice Threatens High-Profile Lawsuit Involving Far More Loans Unless The Company Agrees To Pay A Large Settlement And “Admit” To Flawed Lending Practices And Violations of the Federal Fair Claims Act.

Quicken is asking the US District Court for the Eastern District of Michigan to declare that its FHA loans made in 2007-11 were properly made.

A spokesperson for the Department of Justice declined to comment on an ongoing investigation.

The Justice Department has reached major FHA insured loan settlements in recent years with JP Morgan Chase ($ 614 million in 2014), US Bank ($ 200 million in 2014) and Bank of America (1 billion dollars in 2012). The Bank of America settlement was tied to loans made by Countrywide, the once powerful mortgage lender that nearly collapsed and was acquired by Bank of America in 2008.

Quicken says the Justice Department’s ongoing investigation in Detroit is flawed in several respects, particularly in its use of a sampling methodology that assumes that defaults of a small subset of loans will exist in the same measure on a large population of loans. Quicken calls the sampling method “biased, unreliable, and rife with errors.”

“They applied this illegitimate methodology even though each borrower’s and mortgaged property’s situation is unique, and all FHA lenders are required to keep detailed records of how the FHA loan was taken out and granted,” the FHA loan said. trial.

Quicken said the flaws found by the Justice Department in the 55 loans are minor, such as a miscalculation of a loan seeker’s monthly income of $ 2.10, telling a borrower to bring in $ 125 at closing even though he had approved a loan that only needed $ 48 at closing, and over-loaned an FHA client $ 26 on a $ 99,500 mortgage.

The FHA program provides mortgage loan insurance to lenders such as Quicken Loans, who can claim a federal fund within the HUD if a loan goes bad. FHA loans are popular among low-income or low-credit borrowers who might find it difficult to qualify for a conventional mortgage.

Contact JC Reindl: 313-222-6631 or [email protected] Follow him on Twitter @JCReindl.


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