Massive Ruling Against Quicken

The U.S. 9th Circuit Court of Appeals Monday ruled that Quicken would indeed have to adhere to state law, allowing California’s Department of Corporations to enforce its claim that the Livonia, Mich.-based lender is required to refund interest charges to borrowers in the Golden State from October 1999 through January 2003, according to a court opinion.

The appeals panel ruled that, “because Quicken is licensed under the California Residential Mortgage Lending Act, the Act’s prohibition on charging interest in excess of one day prior to recordation applies to Quicken.”

Quicken CEO Bill Emerson said the company intends to remain grounded in its belief that the law is fundamentally unfair. “We are going to exhaust all of our options and use every remedy available to get people to see the light,” Emerson told MortgageDaily.com.

The statutes in question have since been amended (in 2003) to reflect the change in interest collection to one day prior to disbursement, not recording; however, it is not retroactive, court documents said.

California’s Commissioner for the Dept. of Corporations sent a letter to Quicken in March 2002 stating that Quicken had violated the law prior to the amendment and was seeking restitution for the borrowers whose loan transactions took place while the original law was in effect, according to court documents.

The total amount to be refunded is unknown, according to agency spokeswoman Susie Wong.

“Our department requested of Quicken to conduct an accounting of their records, and they haven’t done that,” Wong said in a phone interview.

The restitution is to include the interest payments received, which violated the original statute and 10 percent interest on the refunded interest, court documents said.

Quicken responded by suing the agency.

Quicken representatives said in an e-mailed statement provided to MortgageDaily.com that the suit it filed against the state contended that interest rates should be calculated from the date on which the funds were available to the borrower, not from the date the mortgage is recorded; a process handled by a third party and out of their control.

“It’s ironic that since Quicken Loans’ initially filed this lawsuit, the California legislature has amended (effective Jan. 2004) the state’s “per diem Interest” statutes and now permits lenders to charge interest from the time the borrower receives the benefit or use of the funds, like the other 49 states in the union,” the statement said. “This amended law conforms to what we contended in our lawsuit, however the amended law was not made retroactive.

The fact is borrowers expect to begin paying interest once they receive the use of the money,” Quicken representatives wrote. “No one was charged more than they actually owed on their loan. Clients were only charged the interest they agreed to pay from the day they received the use of the funds.”

Quicken said they are reviewing the opinion to determine their options, which could include further appeal.

Wong told MortgageDaily.com the Department was enforcing the law as required. “The Department has to enforce the statute until the appellate courts decision (changes).”

Emerson said, “We think there is a fundamental disconnect here; there is not one client that has been wronged and to my knowledge there hasn’t been one complaint.”

Quicken says it is “America’s number one online mortgage lender” and reported $16 billion in loan volume for 2005.