Judge dismisses Quicken Loans lawsuit against feds

Jennifer Chambers, and Joel Kurth

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 on Thursday issued a 24-page opinion and order dismissing the case, rejecting Quicken’s argument the federal government’s case was defective because it involved a sample of loans and emails.

Bill Emerson, Quicken Loans CEO, issued a statement Thursday evening saying the loan company is disappointed the judge has dismissed the “well-reasoned claims” made by Quicken against the Department of Justice and the Department of Housing and Urban Development.

Emerson said Quicken intends to explore its options while “fighting to defeat the government’s retaliatory lawsuit wrongly alleging that Quicken Loans violated the False Claims Act related to a minuscule cherry-picked sample of loans Quicken Loans originated with FHA insurance.”

“This temporary procedural setback does not deter Quicken Loans from exposing the truth about the DOJ’s egregious attempts to coerce unjust ‘settlements’ from its victims including Quicken Loans by using the guise of the heavy hand and power of the federal government in doing so,” he said.

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.

In its preemptive lawsuit, Quicken sought to have the Justice Department's primary case against Quicken heard in Detroit rather than in Washington, D.C. The lawsuit against Quicken Loans is pending in U.S. District Court in Washington.

In its 66-page suit, the government alleges 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 his ruling, Goldsmith said the federal government had not “actually deprived Quicken of any money” because the settlement was proposed.

The judge also wrote that Quicken’s complaint is “replete with broad and conclusory characterizations of agency (HUD) activities, but short on specificity.”

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.

“It looks like there was a decision made: See who is making the most loans and let’s extract settlements because there is a need to make sure the mortgage people pay for whatever crisis happened, whether or not they are guilty or innocent,” Gilbert told The News in April.

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.

Earlier this year, Guy D. Cecala, publisher of Inside Mortgage Finance, told The News that Quicken’s pre-emptive lawsuit was welcomed by a mortgage industry hit with a series of multi-million dollar settlements.

“The industry loves it. It’s fighting back against the evil empire,” Cecala said