Quicken Loans Inc., which is battling the government in court over alleged shoddy lending practices, is reportedly evaluating whether it should continue making government-insured loans.
The Detroit-based organization has originated nearly a quarter-million home loans insured by the Federal Housing Administration, according to a lawsuit it filed against the United States.
The complaint, which was filed in April in U.S. District Court for the Eastern District of Michigan, claims Quicken’s default rate on FHA-insured mortgages is the lowest in the country.
The online lender’s lawsuit — which also names as defendants the Department of Housing and Urban Development, HUD Secretary Julian Castro, HUD’s Office of Inspector General, the Department of Justice and former attorney general Eric H. Holder Jr. — alleges that the Justice Department reviewed just 55 “cherry-picked” loans to determine that it violated the False Claims Act.
Quicken — reportedly the largest FHA lender — alleges it is the victim of a political agenda where the Justice Department is attempting to pressure high-profile lenders into paying 10-figure sums and admitting False Claims Act violations.
Among firms that have agreed to False Claims Act settlements tied to FHA lending are:
- Bank of America Corp., where $800 million of its record $17 billion settlement with the government in August 2014 went to cover FHA loans originated by subsidiary Countrywide Financial Corp.;
- Fifth Third Bancorp, which settled in October for $87 million;
- Golden First Mortgage Corp., which agreed to a $36 million settlement in January;
- GTL Investments Inc., with a more than $4 million agreement reached in December 2014;
- HSBC, where $10 million was paid in a July 2014 settlement;
- JPMorgan Chase & Co., which settled in February 2014 for $614 million;
- MetLife Inc., with its $124 million agreement reached in February;
- SunTrust Mortgage Inc., which agreed to a $968 million settlement in June 2014;
- U.S. Bancorp, where a $200 million settlement was reached in June 2014; and
- Walter Investment Management Corp., where a $30 million settlement was reached in September.
Many times lenders are just settling to avoid prolonged litigation with the government.
In addition, Wells Fargo & Co. is battling the government in a lawsuit filed by the Justice Department over hundreds of millions of dollars in alleged FHA losses.
The government’s aggressive posture in extracting False Claims Act settlements from FHA lenders apparently has Quicken — which ranked as the fourth-biggest home lender in 2014 with $59 billion in originations — questioning its participation in the FHA program.
Quicken Loans Founder and Chairman Dan Gilbert said the company is considering abandoning FHA lending,
Reuters reported. In addition, the billionaire reportedly said the lender is considering cutting the risk it takes in the program.
It’s not the first time a major lender has threatened to exit the program.
JPMorgan Chase & Co. Chairman and Chief Executive Officer Jamie Dimon told investors in July 2014 that he was questioning whether the New York-based financial services behemoth should even be in the FHA business at all.
Chase was the third-biggest lender last year with $81 billion in mortgage production.
