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Judge: Quicken lawsuit can move to Detroit

Jennifer Chambers
The Detroit News

A federal judge has agreed to move a Justice Department lawsuit against Quicken Loans Inc. to Detroit from its original venue of Washington, D.C.

U.S. District Judge Reggie B. Walton issued an order Monday approving the lender’s request to move the case, saying the Eastern District of Michigan is the appropriate forum because the alleged unlawful activity occurred in or near Detroit.

“Although the convenience and governing law factors are neutral, and the relative congestion factor weighs slightly against transfer,” Walton wrote in his opinion, “the parties’ choices of forum, where the claims arose, and the local interest in deciding local controversies in the jurisdiction where they arose weigh in favor of transferring this case.”

The Justice Department sued Quicken in April 2015, alleging the lender violated mortgage underwriting rules and ignored “red flags” on dicey home loans, costing the federal government millions of dollars on Federal Housing Administration-insured mortgages.

Quicken attorneys had said it believed the government's suit should be heard in Michigan, arguing the case has little connection to Washington. The Justice Department noted FHA and U.S. Treasury — which ultimately paid for the claims — are in Washington.

In his order, Walton said the government claims the case is not a local controversy but involves mortgages for properties across the country that adversely affects taxpayers throughout the nation.

“While the court agrees that the case has national implications, the court also agrees with Quicken that there is a stronger local interest in this matter in the Eastern District where Quicken Loans underwrote the FHA loans at issue, endorsed those loans and certified its compliance as to those loans,” Walton wrote.

In its lawsuit, the government allege 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 further 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.

Bill Miller, spokesman for the U.S. Attorney’s Office for the District of Columbia, declined comment on the case. Barbara McQuade, U.S. Attorney for Detroit, was not immediately available for comment on Monday.

Dan Glibert, Quicken chairman and founder, said by phone Monday his attorneys are trying to get the case dismissed but he is looking forward to his company’s day in court.

“We would never settle this case. We are going to have a court and jury decide this. Our reputation is more important than anything here. This is a frivolous lawsuit by the DOJ and that’s it,” Glibert said. “We are going to have our day in court.”

Gilbert also denied the existence of speed bonuses.

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 also alleges 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.

Glibert also denied those allegations Monday.

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.

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 sued the government seeking to quash its three-year investigation into the company’s lending practices.

Last 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 rejected 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 2015, 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.

Quicken founder and president Dan Gilbert had 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 last year.

Officials at Quicken say among the errors found by the government involving the loans in question was a miscalculation of monthly income by $2 and lending a client $26 too much on a $99,000 loan.