23 Jun LENDING GIANT TAKES ON THE GOVERNMENT
Quicken Loans, the third largest mortgage lender in the U.S., is waging a bold battle by suing the U.S. government over disputes about faulty loans and who’s really at fault.
In April, the Justice Department accused Quicken Loans of defrauding taxpayers by submitting mortgages for insurance by the Federal Housing Administration that the government claims Quicken Loans knew were ineligible. Quicken has denied the accusations. The government argues that between 2007 and March 2015 the government has paid more than half a billion dollars in insurance claims on defaulted mortgages endorsed by Quicken Loans.
“Fraudulent origination activity resulted in significant losses of federal funds and is one of the precise types of conduct that caused the financial crisis and housing market downturn,” a Justice Department spokeswoman said.
Quicken Loans, a privately held firm controlled by Cleveland Cavaliers owner Dan Gilbert, denies any wrongdoing. So before the Justice Department could file a lawsuit, Quicken did so first.
Quicken Loans filed a lawsuit accusing the government of trying to illegally try to pressure the company into a large settlement. Quicken Loans executives argue that the government has cherry-picked 55 FHA-insured loans the lender has made out of nearly 250,000 the company has closed since 2007.
Quicken Loans executives say they are fulfilling the mission of the FHA program by lending to low- and middle-income consumers – “an area in which they have picked up market share as banks such as J.P. Morgan Chase & Co. have retreated from the business,” The Wall Street Journal reports. “The executives added that prosecutors’ actions are resulting in fewer lenders making loans to marginal borrowers and first-time home buyers.”
Quicken Loans Chief Executive Bill Emerson told The Wall Street Journal that the government’s action will have a negative effect on the middle class. “It’s mind-boggling to me,” he told WSJ and that’s why, he says, the lender is fighting back.
Source: “Quicken Loans Takes on the U.S.,” The Wall Street Journal (June 14, 2015)