Quicken Loans, DOJ sent to mediation in ongoing battle over FHA loan allegations

Mortgage & Real Estate

Nearly four years after the legal battle between Quicken Loans and the Department of Justice began, the case may finally be decided in court later this year. But not before the parties give settling the matter at least one more try.

In April 2015, Quicken sued the DOJ and the Department of Housing and Urban Development, alleging that the DOJ demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action over the nonbank’s Federal Housing Administration lending practices.

The DOJ then formally accused Quicken of violating the False Claims Act by “knowingly” submitting hundreds of “improperly underwritten” loans for FHA mortgage insurance.

The government’s complaint alleged that Quicken instituted and encouraged an underwriting process that led to employees disregarding FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.

Quicken denied those charges and vowed to fight them, with Quicken Loans former CEO Bill Emerson telling HousingWire that the FHA “has been hijacked by the Department of Justice.”

Quicken was one of the few lenders to fight back against the government’s increased use of the False Claims Act as a means to extract massive settlements from FHA lenders under the Obama administration.

The DOJ under President Barack Obama accused a number of lenders, including some of the nation’s largest, of violating the False Claims Act by knowingly originating and underwriting mortgages that did not meet FHA standards.

But, the Trump administration has taken a different path, with both FHA Commissioner Brian Montgomery and HUD Secretary Ben Carson saying that the administration planned to back off of using the False Claims Act to go after FHA lenders.

Despite that, the case between DOJ and Quicken is still ongoing and is now nearing its four-year anniversary.

And it appears that the case might finally go to trial, as a trial date has been set for Aug. 5, 2019. But, according to a report from the Detroit News, Quicken and the DOJ have been ordered to go to mediation in a effort to settle the case before that trial begins.

From the Detroit News:

U.S. District Judge Mark A. Goldsmith filed Friday an order that the parties meet with Gerald Rosen, the retired chief judge of the U.S. District Court for the Eastern District of Michigan, in efforts to develop a settlement prior to the trial scheduled for Aug. 5.

“With summary judgment motions having been filed and this case approaching a potential period of intense trial preparation,” Goldsmith wrote, “the Court concludes that it would be prudent for the parties to make a renewed effort to resolve this matter.”

According to the article, Quicken said that it will participate in the mediation but plans to fight the case “to the end.”

In its lawsuit, the government alleged that from September 2007 through December 2011, Quicken “knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans.”

Emerson told HousingWire in 2015 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.”

The judge overseeing the case later limited the timeframe that the DOJ could pursue claims against Quicken from 2007-2011 to 2009-2011, and threw out Quicken’s lawsuit against the DOJ.

And now, the DOJ and Quicken will head to mediation to try to settle the case. If not, they’ll head to court in August.

For more on the story from the Detroit News, click on the link below.

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