Lending

Quicken Loans wins first round in court battle versus DOJ, HUD

Judge rules Quicken's suit against Feds will be heard first

scale and gavel

Quicken Loans secured the first victory in its battle against the U.S. Department of Justice and the Department of Housing and Urban Development when a federal judge ruled that Quicken’s lawsuit against the government will be heard before the government’s case against Quicken is heard in a separate court.

In mid-April, Quicken sued the DOJ and HUD in Federal Court in Michigan, saying that it was left with no alternative but to take legal action after the DOJ demanded Quicken Loans make “blatantly false” admissions about its lending practices, as well as pay an massive penalty or face legal action.

Then, several days later, the government countersued Quicken in Federal Court in Washington D.C., saying that the lender “knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten loans” insured by the Federal Housing Administration from September 2007 through December 2011.

According to a report from MLive, U.S. District Judge Reggie Walton in Washington handed down a ruling Friday, granting a motion from Quicken, which will allow Quicken’s suit against the DOJ and HUD to be heard first.

The MLive report states that Walton will not hear the DOJ’s suit against Quicken until U.S. District Judge Mark Goldsmith in Detroit decides whether to move forward with Quicken’s case against the DOJ.

From the MLive report:

Jay Farner, Quicken Loans President and CMO, told MLive on Friday that it had been "a good day in court for us."

The MLive report states that the two sides are arguing over where both cases will be heard, with Quicken pushing for the cases to heard in its native Detroit and the DOJ pushing for the cases to be heard in Washington.

According to a separate report from The Detroit News, Walton told the parties that he is “leaning” towards moving both cases to Michigan.

“Aren’t all the documents and witnesses there, and the loans granted from a location in that district?” Walton said, according to the Detroit News report. “If that’s true, I’d be inclined to transfer.”

According to the DOJ, Quicken was a direct endorsement lender with the FHA, which gave Quicken the authority to originate, underwrite and certify mortgages for FHA insurance.

In its suit, the DOJ alleges that Quicken did not adhere to the FHA’s underwriting standards.

The government’s complaint alleges that Quicken instituted and encouraged an underwriting process that led to employees disregarding FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from 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 its suit. “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.”

When Quicken filed its suit against the DOJ, the lender’s CEO, Bill Emerson, said that the company was left with no other choice.

"After three years of struggling to understand the DOJ's position and methodology that would warrant the country's largest and highest quality FHA lender to make untrue admissions and pay an inexplicable penalty or face public legal action, it is time to ask the court to intervene," Emerson said at the time

"No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its leadership from doing the right thing,” Emerson continued. “We will stand in defense of our impeccable reputation established by thousands of hard-working ethical team members over our 30-year history."

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