In a recent turn of events, the U.S. government is suing Detroit-based lender Quicken Loans after accusing the lender of taking improper action on loans insured by the Federal Housing Administration, costing the federal government millions of dollars on FHA-insured mortgages.
This 66-page lawsuit, issued last Thursday, comes only days after Quicken sued the Department of Justice as well as the Department of Housing and Urban Development (HUD) with claims that the company was forced to take legal actions after the DOJ demanded they make false public admissions and pay a hefty penalty, or be faced with legal repercussion.
In the reverse suit, the DOJ claims that for a period of several years—September 2007 through December 2011—Quicken “knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans.”
The DOJ alleges that Quicken, a direct endorsement lender with the FHA, was authorized to originate, underwrite and certify mortgages for FHA insurance, but failed to adhere to several important standards, which is a problem as neither the FHA nor HUD reviews the underwriting of a loan before it is endorsed.
The government states that Quicken operated an underwriting process in which employees disregarded FHA standards in order to benefit from the profits of FHA-insured mortgages.
“The complaint further alleges that Quicken failed to implement an adequate quality control program to identify deficient loans, and that Quicken failed to report to HUD the loans it did identify,” the DOJ said. “In particular, according to the government’s complaint, despite its obligation to report to HUD all materially deficient loans, during the period from September 2007 to December 2011, Quicken concealed its deficient underwriting practices and failed to report a single underwriting deficiency to the agency.”
A statement from Quicken counters the DOJ’s complaint, saying:
“The complaint filed today is riddled with inaccurate and twisted conclusions from fragments of a handful of emails cherry-picked from 85,000 documents that the DOJ subpoenaed. Worse than that, the DOJ appears to be basing their entire case on a handful of out-of-context email conversations skimmed from the communication between Quicken Loans employees. These conversations relate to a miniscule number of loans out of the nearly 250,000 FHA mortgages the company has closed over the past seven years.
“The real victims in this unjust claim are the millions of middle class American families who rely on FHA financing to reach their goal of affordable home ownership. For now, Quicken Loans plans to continue offering FHA mortgages to our clients, but like nearly every lender in the country, we will be evaluating the prudence of our continued participation in the FHA program.
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