Two West Virginia law firms have won a federal case against Quicken Loans Inc. that stemmed from allegations the lender suggested home values to appraisers who are supposed to be objective.
The U.S. District Court judge imposed a penalty of nearly $11 million, or $3,500 per violation of the state’s Consumer Credit and Protection Act. The class-action suit involved 2,770 consumers.
Detroit-based Quicken said it will appeal the ruling and blasted the law firms as “predatory.” The class is represented by Bordas & Bordas and Bailey Glasser, both based in West Virginia.
One of the attorneys, Jim Bordas, said the danger of skewed appraisals is that a home could be valued for more than what it’s actually worth, and that could allow a consumer to borrow more than the home’s value. That could be disastrous if the consumer wants to sell at some point, but owes more than the home is worth.
If a lender is suggesting a value to an appraiser, it’s just bad business, Bordas said.
Bordas said this is the first such case he’s aware of involving the objectivity of appraisals. He said this ruling could cause lawyers to file cases in other states.
A spokesman for Quicken blasted the lawyers.
“This case is the latest example of predatory plaintiff law firms … manipulating our nation’s legal system by inventing a class of so-called ‘aggrieved’ plaintiffs to enrich themselves financially at the expense of lenders thereby, driving up the costs of financing to homeowners and future homebuyers.”
Quicken said the law firms could end up with millions of dollars while their clients could get small amounts.
“If any party would be aggrieved by appraisers assessing a higher-than-market value to the homes that serve as collateral for loans, it is the lenders who would be damaged by this inadequate collateral,” Quicken said.
The statement doesn’t address the issue of consumers who might be overpaying for a home.
Quicken also said the court’s conclusion that appraisers may have been influenced by homeowners’ suggested values was off-base.
“The class data showed that providing a borrower’s estimated value did not have any impact on appraiser valuations,” the lender said. “Professional appraisers, who are subject to their own licensing and ethical standards, deliver independent valuations.
“There is also no evidence,” Quicken added, “that the valuations the appraisers issued at the time were inflated in any way or caused any damages whatsoever to a single plaintiff in the class.”
Quicken said it’s confident the ruling will be overturned on appeal.
Bordas said he too is confident. “We’re in it for the long haul.”
Bordas and partner Jason Causey previously sued Quicken over another consumer case, and won a $3 million verdict. In that 2006 case, Quicken approved a refinance loan for a woman for $144,800, even though the home was worth only $46,000.
