All Hail, Glorious Leader
Steve Dibert, MFI-Miami
Back in the day when I originated loans in Metro Detroit, I had friends who worked at Quicken Loans and it was apparent they drank the special Dan Gilbert flavored Kool-Aid. It got to the point where they would meet me and others for cocktails and they would bring more and more “new” friends from Quicken and all they talked about was Quicken Loans and how you were a loser if you didn’t work for Quicken Loans. It was eerily similar to the Simpsons episode when Homer and other people from Springfield join a cult known as the Movementarians. Bart plans to be himself with his “Lil Bastard Mischief Kit,” but the Movementarians outwit him with a “Li’l Bastard Brainwashing Kit.”
This was about the time Dan Gilbert purchased the Cleveland Cavaliers and one of Dan Gilbert’s dark secrets emerged into the public light. He had been arrested as part of a sports betting ring at Michigan State University back in the early1980s. This later resurfaced when he loaned now indicted Detroit Mayor Kwame Kilpatrick $240,000 and while he was trying to purchase two Ohio casinos. His spokesman claims the police officer who investigated the case is lying, yet stories of his roughing up gamblers who didn’t pay him seem to pop up very time he wants to venture into a new business. What proved to be interesting was having conversations with Quicken employees about this subject at the time. They would adamantly defend Dan Gilbert by saying, “If it’s true that he did rough them up, they had it coming for not paying up.” or “Dan had every right to do what had to in order to collect the money he was owed.”
It didn’t bother them that what he was allegedly doing at the time was illegal.
Dan Gilbert was never charged nor was he ever convicted in the sports betting sting. Why he was never charged seems to be the big mystery but what ever the answer was, it seemed to satisfy both the National Basketball Association and Ohio gaming officials.
Employees would call any one who criticized or questioned Dan Gilbert or Quicken Loans as “haters”. Friends of mine who no longer work for Quicken tell me they were often encouraged to only hang around other members of the “Quicken Family” after hours.
As Quicken grew, people in the lending industry in Michigan used to refer to them as the “Quicken Cult” because of Dan Gilbert’s demand his employees work insane hours and that they attend Pistons-Cavaliers games at the Palace of Auburn Hills in Cavs jerseys even though one of his subsidiaries, Rock Financial was a major marketing partner with the both the Detroit Pistons and the Palace of Auburn Hills. His employees showed up in droves and even paid for their own tickets because the Glorious Leader asked them to. This blind apostolic following of Dan Gilbert explains why Quicken continually ranks in the top 100 employee surveys.
But what wasn’t widely known at the time was the fact that Quicken, like many sub-prime lenders at the time, was acting as a correspondent lender for various lenders. Up until it’s demise, Countrywide Financial was purchasing the majority of their loans and then securitizing them into Mortgage Backed Securities. Because of the volume of sales from Quicken’s television and internet advertising, major lenders and GSEs were eager to purchase the roughly $25 Billion in loans that Quicken originated and had been selling to Countrywide. This is why Quicken was able to escape the carnage and tarnished images of the financial crisis. It’s not necessarily because they were “one of the good guys” as Dan Gilbert claims but because they didn’t carry any liability from of the loans they originated.
Contrary to popular belief and what the Quicken Kool-Aid drinkers may claim, Quicken did write sub-prime loans, they just didn’t write B and C sub-prime loans which was generally people with below a 620 credit score with blemishes on their credit. At the time, a sub-prime loan was anything that did not fit into Fannie Mae or Freddie Mac guidelines. In other words you could have homeowners with 700 credit scores in programs such as Option-ARMs or NINJA loans which are considered sub-prime loans.
A recent article by Michael Hudson for the Center for Public Integrity also states this claim.
“These included “interest-only” loans and “negative amortization” loans, which have been criticized by consumer advocates because they provided the illusion of low initial payments but were dangerous in the long run because they didn’t pay down borrowers’ mortgage debt. In the case of negative amortization loans, borrowers’ debt grows even as they make on-time payments.”
So now that judgments are being awarded against Quicken for fraud including one last February in West Virginia when a state court had found Quicken committed fraud by misleading her about the details of her loan, charging excessive fees, and using an appraisal that exaggerated the value of her home by nearly 300 percent. The judge called the lender’s conduct “unconscionable.”
In this case, Quicken initially denied any wrong doing until a jury found that they had committed fraud by appraising the client’s property at 300% of it’s market value and by lying to her about her Option-ARM loan, they then changed their tune and threw an unnamed low level employee under the bus for the fraud. According to Michael Hudson:
“During the trial, an attorney for the company argued there was no evidence that Quicken colluded with the appraiser or “did anything usual or anything inconsistent with industry practice.” In a court filing in September relating to the question of punitive damages, the company described the problems with the loan as an “isolated incident” created by “mere excess of zeal by a poorly supervised, low level, former employee.””
Quicken like most lenders during the boom operated like something out of the movie, The Boiler Room. As Hudson describes in his article that employees claim:
“They sat row by row in a sea of cubicles, they say, working 50- and 60-hour weeks, plugged into headsets and directed by “LOLA,” a computer program that told them which prospective customers to call. Managers stood on “The Bridge” (a nod to TV’s Star Trek), a control center that allowed them to monitor minute-by-minute what employees were doing, even, the former employees claim, listening in on calls and rebuking workers if they tried to take a coffee break or failed to follow the lender’s carefully scripted sales pitch.
One former salesman said it was as if Quicken executives were “training monkeys to sell their products to customers.” A former saleswoman described the environment as “very hostile, with management using intimidation tactics, public humiliation, and profanity when dealing with the sales team members. . . . We were berated, screamed at, and had our jobs threatened to increase our sales.””
One former employee said that a technique known as “bruising” was often employed on homeowners. This technique was used to make the homeowner feel guilty or ashamed about a late payment on their credit report even if wasn’t relevant to the processing or underwriting of the loan and was often utilized by the boiler room shops. This was often done in order to get the homeowner to trust the loan officer or as Quicken called their order takers, “Consultants”. These Consultants wanted the trust of the homeowner, because then the homeowner wouldn’t question any higher rates or hidden fees that the loan officer would later put in the file after the initial application was taken. The homeowner would be manipulated into being so thankful for receiving the loan that they wouldn’t care about paying extra fees and/or higher rates. This practice was common in the industry and Quicken wasn’t the only one doing it.
Trust, as anyone who reads Sam Antar’s website about white collar crime knows, is the key to getting someone to do as you wish. As Sam once wrote, “You can steal more with a smile or a sweet voice than you can with a gun.”
An email was also sent to employees telling them to limit the amount of information they give to a client:
“We must use Controlled Release of Information. This consists of giving only small nuggets of information if the client is PUSHING for answers.. . . The controlled release of information should be used when the client asks specific
Employees have also come forward to claim that they were instructed to lie to homeowners and to falsify income in order to make a deal work. Homeowners like Graham and Janet Higton of Arizona who claim in a federal lawsuit that a Quicken Consultant inflated their monthly income to $8000 and then steered them into an Option-ARM loan which they didn’t understand.
Quicken denied any responsibility according to Hudson, Quicken describes some of the couple’s claims as “sheer nonsense” and says that the Higtons are attempting to “manipulate the system.”
Employees have come forward to say they were expected to work 50-60 hours a week. If the lawsuit is successful, it could cost Quicken between $10-30 million. Paula Silver, Quicken vice president of communications, said in a prepared statement that “Quicken Loans has won several key victories since this weak claim was filed early last decade. The company remains strongly committed to defending this meritless claim where we expect to defeat this self-serving plaintiff law firm’s parasitic action.”
Quicken also claims the employees did not qualify for overtime pay because they provide expert financial advice to borrowers in much the same way that stock brokers advise investors, the company has said, they are salaried and commissioned workers who are exempt from overtime laws.
Of course, this is all bullshit. I’ve worked for brokers and lenders and you still have to pay overtime especially if these employees are in Michigan. I know of at least 10 brokers and correspondent lenders in Michigan who were sued for doing the same thing Quicken did and all of them lost. Everyone in the industry knew Quicken’s loan officers were nothing more than order takers who then passed the loan on to processor much like the bigger mortgage broker shops did during the post 9/11 boom.
Attorneys for the former employees seem to understand this by arguing that the company’s loan consultants aren’t trained to provide advice, but rather to manipulate and mislead.