U.S. charges Quicken Loans with mortgage fraud
NEW YORK - The Justice Department is suing Quicken Loans, saying the lender approved hundreds of mortgage loans that didn't meet federal standards, leaving the government stuck with the bill when borrowers defaulted.
The U.S. Department of Justice said Thursday that between September 2007 and December 2011, Quicken approved, underwrote and certified the insurance of hundreds of mortgages that didn't meet federal guidelines.
It said Quicken encouraged its employees to disregard Federal Housing Administration rules and say mortgages met the guidelines when they did not. Quicken sometimes asked appraisers to inflate the value of homes so it could approve the loans, and managers sometimes let underwriters break FHA rules to approve loans, the department said.
The loans were insured by the U.S. Department of Housing and Urban Development, and Quicken filed for reimbursement when the loans defaulted. According to the Justice Department, HUD has already paid millions of dollars in claims on the loans Quicken underwrote, and more claims could be coming.
In a statement, Quicken said the FHA's own reporting ranks it as the highest-quality large FHA lender -- meaning it has the lowest default rate. It also said its FHA-backed mortgages make large profits for the government. The company described the lawsuit as "abusive" and the government's investigation as a "witch hunt."
Quicken sued the federal government last Friday, saying it had done nothing wrong and that the government was trying to get it to admit wrongdoing and pay big penalties for political reasons. The company says it is the second-largest mortgage lender in the U.S. and the largest lender of loans guaranteed by the FHA. It says it was notified about a government investigation three years ago.
The Detroit-based company was a direct-endorsement lender approved by the FHA, which meant FHA and HUD did not review the loans before the FHA insured them.
The founder and chairman of Quicken Loans is Dan Gilbert, also the majority owner of the NBA's Cleveland Cavaliers. Gilbert has been active in the redevelopment of downtown Detroit.