The DOJ’s False Claims Act Suit Could Force Quicken Loans To Give Up FHA
The legal battle between Quicken Loans and the DOJ may drive Quicken out of FHA lending. The DOJ’s alleges that Quicken knowingly submitting hundreds of fraudulent loans insured by the Federal Housing Administration
Quicken Loans owner Dan Gilbert had several of his infamous Veruca Salt-style tantrums on the internet and in the media over the government’s False Claims Act Suit.
Gilbert claimed the federal government was attempting to bully and shake down Quicken for millions of dollars. Gilbert went on to claim HUD was on a “witch hunt”.
Donald Trump wannabe Gilbert then had a what appeared to be an alcohol-fueled Twitter meltdown saying:
He then began blocking MFI-Miami and other Quicken Loans critics from his social media and internet feed.
Dan Freed at Reuters wrote: Now Quicken, the largest FHA lender, is looking at bowing out as well, company founder and Chairman Dan Gilbert told Reuters. It is also considering cutting the risk it takes in the program.
The Legal Battle Between Quicken Loans And The DOJ
Quicken filed a hastily written lawsuit against the DOJ and the HUD on the eve of the Doj filing suit. Gilbert wanted the case heard by a Quicken Loans friendly judge in Detroit.
The lender claims the DOJ insisted the company make public admissions that were blatantly false. Quicken also stated the DOJ demand they pay an inexplicable penalty or face legal action.
The False Claims Act suit filed by the DOJ was a result of a three-year investigation by HUD. HUD found problems in 55 loans from September of 2007 through December 31, 2011.
Gilbert has been claiming HUD subpoenaed over 85,000 loans for the False Claims Act suit. However, 85,000 loan files seem highly unlikely.
FHA loans are insured by the government against any loss if the homeowner goes into foreclosure.
HUD monitors any loans they have to pay a claim on. They also have systems in place that alert them when a pattern of defaults originated by a specific lender develop.
This triggers a visit from HUD officials to audit files. HUD then requests to review loan packages that they deem may be at risk of default if the see a pattern.
The problem for Quicken is that HUD alleges in their False Claims Act suit they found not only fraud but damaging emails from executives trying to cover up the fraud. The amount HUD paid out to cover deficiencies is unknown. However, the Detroit News claims:
This dollar figure sounds exaggerated. The DOJ can’t justify a $100 million dollar fine on the 55 loans Gilbert claims the DOJ found.
Gilbert knows the DOJ won’t publicly say what the dollar figure is.
Assuming Gilbert’s claim of 55 loan files is accurate the False Claims Act only allow for a maximum fine of closer to $15-$25 million.
That is, if Gilbert’s claim that only 55 loans had issues. If the DOJ is pursuing a $100 million settlement as Gilbert claims, it would mean HUD found roughly 150-200 loans riddled with fraud or other problems.
The False Claims Act suit against Quicken Loans by the government isn’t the first time Quicken has been accused of bullying appraisers to jack up property values and “fudging” the incomes of loan applicants.
In 2011, Quicken was successfully sued for inflating appraisal values in West Virginia. The judge in that case even said on the record:
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.