Quicken Loans Inc. has filed a lawsuit alleging that it is being pressured to settle with the government on compliant Federal Housing Administration loans.
A complaint filed in federal court on Friday in Detroit by the online lender alleges it was notified almost three years ago by the Department of Housing and Urban Development’s Office of Inspector General that an investigation was being launched into its lending practices.
But at the time, Quicken claims it was assured by the Department of Justice and the HUD OIG that that the investigation was part of multiple investigations into all of the largest FHA lenders and not because wrongdoing was suspected.
Quicken said that based on FHA reports, it currently has the lowest default rate on FHA-insured loans in the country — leaving it unconcerned about the Justice Department’s inquiry.
“Quicken Loans has built a reputation as the ‘gold standard’ for the quality of its loans in both government lending (FHA and VA), as well as conventional lending and it has also led the industry in customer service as evidenced by the company being named the top JD Power and Associates lender for mortgage origination satisfaction over the past five consecutive years,” the complaint states.
Given that HUD has sought input from Quicken in the past and the productive relationship Quicken has with HUD field offices, there appeared to be no cause for alarm.
But after a Justice Department review
of just 55 “cherry-picked” loans out of the 246,000 FHA-insured mortgages that Quicken has closed, the company claims that the Justice Department repeatedly threatened a high-profile lawsuit unless it paid a multiple of hypothetical losses. The sampling allegedly contradicted a 2013 Federal Register notice from HUD saying it wouldn’t use sampling as a basis for demand reimbursements.
So Quicken sued.
Among several government defendants named are HUD, HUD Secretary Julian Castro and the Department of Justice.
The complaint notes that Quicken, which started making FHA loans 27 years ago, “is the largest lender of Federal Housing Administration insured loans in the United States today.” HUD has reportedly earned $5.7 billion in net profits on Quicken’s FHA business from 2007 through 2013.
The lawsuit acknowledges that a small amount of errors were made on FHA-insured loans. But Quicken alleges it cooperated with FHA to resolve the issues and has agreed to indemnify FHA on 56 loans.
“Yet, at the apparent directive of the DOJ and HUD-OIG, HUD now has abruptly changed the rules retroactively and abandoned that long-established, cooperative approach and its established process for retrospective evaluation of previously-originated loans,” the lawsuit states.
According to the complaint, Quicken 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.
More than 85,000 documents have allegedly been subpoenaed by the Justice Department over the past three years, according to the lawsuit. In addition, numerous executives at Quicken have been deposed.
Quicken is asking the court to prohibit the government from determining loan quality and compliance “through their newly fabricated conjectural extrapolation sampling.”
It also seeks a ruling that loans originated from 2007 to 2011 were properly originated in compliance with FHA guidelines.
HUD didn’t immediately respond to a request for comment.
