“In the complaint, Quicken said that the Justice Department based its settlement demands on a sampling of 55 of 246,000 loans and that the defects included miscalculating a borrower’s income by $17 and lending a borrower $26 too much…

…Quicken Loans Inc. late Friday sued the U.S. Department of Housing and Urban Development and the Justice Department, alleging it is a target of a “political agenda under which the DOJ is ‘investigating’ and pressuring large, high-profile lenders into paying nine- and 10-figure sums and publicly ‘admitting’ wrongdoing.” In its complaint, Quicken says it is fed up being pressured to settle charges for fraud it says it didn’t commit.”, Joe Light, “Quicken Strikes Back, Suing DOJ and HUD Over Investigations”, The Wall Street Journal

“For those who don’t understand, 55 loans (and likely non-randomly selected nonperforming ones at that), out of 246,000 made, is not a statistically-valid sample that can be used to draw any factual conclusions about Quicken’s FHA mortgage underwriting. I’ve said time and again throughout this blog that the government has not proved their allegations in any court of law, in any mortgage loan underwriting case that I am aware of. Instead they have used their awesome power to coerce some of the largest banks and Wall Street firms into multi-billion settlements, where no facts have been determined in court (the agreements specifically say this) and the banks/Wall Street only ACKNOWLEDGE receipt of, they don’t agree with, an appendix listing “government facts.” It’s nice to see someone who has the financial strength (and is not a regulated bank or public company) so it can actually stand up and fight these unproven (and denied) government allegations. It’s one of the most patriotic things that a company can do to preserve the truth and American liberty and justice for all of us.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Markets

Quicken Strikes Back, Suing DOJ and HUD Over Investigations

Detroit lender alleges it’s a target of a political agenda, being pressured to settle fraud cases

The Department of Justice finds itself a defendant in a suit brought by Quicken Loans Inc. over investigations of mortgage fraud.

The Department of Justice finds itself a defendant in a suit brought by Quicken Loans Inc. over investigations of mortgage fraud. Photo: Associated Press

By Joe Light

Long on the attack in mortgage-fraud cases, the U.S. government now finds itself the defendant in a lawsuit brought by one of the country’s largest consumer lenders.

Quicken Loans Inc. late Friday sued the U.S. Department of Housing and Urban Development and the Justice Department, alleging it is a target of a “political agenda under which the DOJ is ‘investigating’ and pressuring large, high-profile lenders into paying nine- and 10-figure sums and publicly ‘admitting’ wrongdoing.”

In its complaint, Quicken says it is fed up being pressured to settle charges for fraud it says it didn’t commit.

The lender says the government threatened to file a lawsuit unless the company paid a multiple of damages based on a sampling of its loans backed by the Federal Housing Administration, admit that its lending practices were “significantly flawed” and publicly state that it had committed fraud under the False Claims Act.

Spokesmen for the Justice Department and HUD declined to comment.

The complaint from the Detroit-based company, filed in the U.S. District Court for the Eastern District of Michigan, said that the Justice Department investigation was launched almost three years ago and that the department had subpoenaed more than 85,000 documents.

The lawsuit is a rare pre-emptive move by a company under investigation and a twist in government efforts to collect crisis-related penalties. It also reflects lenders’ frustrations with what they say are unfair moves in the government’s yearslong effort to punish firms involved in the crisis.

The Justice Department has been investigating a variety of lenders in connection with mortgages insured by the FHA before the financial crisis.

Quicken, as a large issuer of FHA mortgages, is part of that probe, but since it isn’t a public company, it hasn’t disclosed any investigations as other big lenders have.

Quicken Loans CEO Bill Emerson calls the U.S. probe ‘a shame.’ Photo: Susan Walsh/Associated Press

Over the past few years, the Justice Department has reached several multimillion-dollar settlements with banks including J.P. Morgan Chase & Co., SunTrust Banks Inc. and U.S. Bancorp for submitting loans for insurance to the FHA that the government says weren’t eligible or had mistakes.

The FHA sells insurance to make lenders whole if borrowers default and is one of the primary means through which borrowers with low credit scores and low down payments get loans.

However, for the past few years, some lenders have been pulling back from the program, citing heavy and uncertain penalties on loans made during the crisis.

“It’s a shame the DOJ would choose to attack the country’s largest and highest-quality FHA lender providing government lending for home buyers and homeowners across all 50 states at the very time our nation needs expanded access to credit for middle-class Americans who benefit most from the FHA program,” said Quicken Chief Executive Bill Emerson.

In the complaint, Quicken said that the Justice Department based its settlement demands on a sampling of 55 of 246,000 loans and that the defects included miscalculating a borrower’s income by $17 and lending a borrower $26 too much.

Because lenders must certify the FHA-backed loans they make have no errors, the government has sometimes pursued damages under the False Claims Act, a Civil War-era law that lets the government recover triple damages.

That has led to what some banks say are onerous settlements for minor penalties. Rather than audit banks’ entire loan portfolios, the Justice Department also tends to extrapolate mistakes based on a sample, another practice that has drawn some banks’ ire.

“The risks of doing FHA loans for lenders is too high and marks a low point when a Quicken Loans has to fight back,” said David Stevens, president of the Mortgage Bankers Association, which lobbies on behalf of lenders. “This has gone too far and will only hurt consumers’ access to credit.”Mr. Stevens is a former FHA commissioner.

A Quicken spokesman in an email said that the company would continue to make FHA loans in the near term and that “like nearly every lender in the country, we will be evaluating the prudence of our continued participation with FHA.” Last year, Quicken’s FHA loan volume declined roughly in line with the rest of the industry.

Posted on April 20, 2015, in Postings. Bookmark the permalink. Leave a comment.

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