At last month’s Mortgage Bankers Association National Secondary Market Conference in New York City, much of the industry scuttlebutt focused on Quicken Loans, its decision to sue the Department of Justice and the Department of Housing and Urban Development and the lawsuit’s impact on the industry.
Now, in an exclusive interview with HousingWire, Quicken Loans’ CEO Bill Emerson said that the lender is not going to give in to the government’s pressure and pay up.
“This is about extracting a payment settlement and getting us to suggest that our company did something wrong,” Emerson told HousingWire. “We’re simply not going to do that. We did not commit fraud against the government and we’re not going to cave to the DOJ’s demands and falsely claim that.”
The lawsuit centers on the DOJ’s allegations that Quicken violated the False Claims Act by “knowingly” submitting hundreds of “improperly underwritten” loans insured by the Federal Housing Administration from September 2007 through December 2011.
The company says it was left with no alternative but to sue the government after the DOJ demanded Quicken Loans make public admissions that were “blatantly false” and pay an exorbitant fine, or face legal action.
“It’s beyond comprehension why we would not stand up and fight when we know we’re right,” Emerson said. “That’s exactly why we filed the case. We’ve been very clear on where we are. We are the largest FHA lender and the highest quality lender by FHA’s own objective measurements standards.”
After Quicken sued the government, the government countersued Quicken in federal court in Washington D.C., leading to a courtroom battle that’s the talk of the industry.
The DOJ’s use of the False Claims Act to obtain a settlement made headlines Monday, when the DOJ announced that First Tennessee Bank, the regional bank for First Horizon National (FHN), will pay $212.5 million to resolve allegations that it violated the False Claims Act by “knowingly originating and underwriting” loans insured by the FHA that did not meet appropriate standards.
Emerson told HousingWire that the FHA has its own review process for loans, but that process has been abandoned at the direction of the DOJ.
“The FHA has been hijacked by the Department of Justice,” Emerson told HousingWire. “The FHA has its own process called the Post Endorsement Technical Review, but the DOJ has basically told FHA to abandon this process.”
Emerson told HousingWire that the government’s efforts to extract a settlement are based on a minuscule number of loans.
“We’re talking about 55 loans that the DOJ said had an issue with out of the 250,000 FHA loans that we’ve done in that time period,” Emerson said. “We refuted 47 of those, so we’re only really talking about eight of those.”
Last week, Quicken secured the first victory in its battle against the DOJ and HUD 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.
“The case is moving its way along,” Emerson said. “We filed our rightful action first. It’s in that process from a legal perspective.”
Emerson isn’t alone in his view of the governmental overreach. In his keynote address at MBA Secondary last month, David Stevens, the president and chief executive officer of the MBA, told the crowd that the Justice Department and other enforcement agencies “appear to be in the driver’s seat” on the nation’s housing policy.
“Everyone working in the mortgage business feels like there is a giant target on their backs,” Stevens said. “The negative rhetoric and the enforcement environment are hurting everyone — homebuyers, lenders and the stewards of the nation’s economy. Housing policy is failing today.”
Stevens and Emerson both share the opinion that the government’s tactics are hurting potential homebuyers.
“We feel this process is over-reaching and illegal,” Emerson said, speaking of the DOJ's tactics.
“The people that are being harmed by the DOJ are American homebuyers,” Emerson continued. “These people are now having a harder time getting an FHA loan. It’s now more difficult for people to get an FHA loan and that’s not what FHA is all about.”
[Correction: An early version of this article reported the total number of loans that the DOJ had an issue with to be nine. The actual number of loans is eight.]