Quicken Loans wants government case tried in Detroit

Jennifer Chambers
The Detroit News

Quicken Loans wants to fight a U.S. Justice Department lawsuit on its own turf and for a second time has asked a federal judge to transfer the case to a Michigan court.

In a renewed motion filed late Friday in Washington, D.C., attorneys for Quicken Loans are again asking U.S. District Judge Reggie B. Walton to move the case to the Eastern District of Michigan for the convenience of witnesses and parties to the lawsuit.

The government is suing the loan giant, alleging Quicken knowingly submitted claims for hundreds of improperly underwritten FHA-insured loans. These loans involved inflated appraisals, poor credit risks and borrowers with insufficient incomes. Quicken also failed its obligation to disclose problems with the loans to the FHA, the suit said.

The government alleges Quicken gave “speed bonuses” to underwriters and encouraged a culture of bending the rules to encourage loan approvals. The suit claims taxpayers lost millions of dollars when the loans went bad.

In its motion, Quicken attorneys Jeffery B. Mouthorgan and Thomas M. Hefferon say “all or virtually all of the alleged wrongful conduct occurred in Detroit or its suburbs where Quicken Loans is and always has been headquartered.”

That includes underwriting decisions and management directions on which the government’s case is centered, the suit alleges.

“Indeed every single person identified in the United States’ complaint works in Detroit and all of the documents referenced in the complaint are located in Detroit,” the motion says.

The Justice Department has until March 9 to file its response.

The Justice Department and the HUD Office of Inspector General began investigating Quicken — an FHA-approved lender for nearly 27 years — under the False Claims Act. The scope of the investigation encompassed about 246,000 FHA loan Quicken had originated from mid-2007 through Dec. 31, 2011.

The federal government’s lawsuit alleged Quicken employees regularly spoke of “fudging” a borrower’s income to get approval for FHA insurance. It included emails from company officials discussing the “bastard income” of borrowers. One email described how a customer was approved for a loan after he stopped paying other bills and his credit score dropped 100 points.

The lawsuit followed numerous settlements between the Justice Department and other mortgage writers, and Quicken officials claimed the federal government was targeting all lenders after the 2008 mortgage meltdown.

The government’s case against Quicken involves some 85,000 documents. Quicken officials claimed the federal government’s case involves about 50 of the 250,000 loans the company wrote during that time.

In the motion filed on Friday, attorneys for Quicken Loans say the case has no substantial link to the District of Columbia and that three of the 3,885 claims potentially at issue involve loans made there.

“This only shows that the connection of Washington to this case is utterly insignificant,” the motion says.

Quicken Loans asked for the venue change in May 2015, but Walton temporarily delayed the government’s case against, saying it would be “prudent” to wait for a ruling by a federal court in Detroit, where Quicken Loans has sued the government seeking to quash its three-year investigation into the company’s lending practices.

In December, a federal judge in Detroit dismissed Quicken Loans’ lawsuit against the U.S. Justice Department that alleged the government unfairly targeted lenders after the 2008 mortgage crisis.

U.S. District Judge Mark A. Goldsmith dismissed the case, rejecting Quicken’s argument the federal government’s case was defective because it involved a sample of loans and emails.

Quicken sued the federal government in April, just days before the Justice Department filed a lawsuit against the online mortgage seller, claiming it approved from September 2007 through December 2011 hundreds of mortgage loans that didn’t meet federal standards.

In April, Quicken founder and president Dan Gilbert told The Detroit News that Quicken filed suit first because the Justice Department was on a “witch hunt.” Federal attorneys wanted a “nine-figure settlement” from the Detroit company before filing suit, Gilbert said.