Risk & Compliance

Quicken Loans Founder Accuses Feds of ‘Witch Hunt’

Dan Gilbert fires back at the Justice Department over lawsuit regarding the underwriting of Federal Housing Administration mortgage loans.
Matthew HellerApril 27, 2015

It may not have the ratings appeal of an NBA playoff series but a legal war has erupted between Cleveland Cavaliers owner Dan Gilbert and the U.S. government over accusations that his Quicken Loans company improperly approved hundreds of mortgage loans.

The Department of Justice last week sued Quicken, alleging it violated federal underwriting rules in making loans backed by the Federal Housing Administration. The suit said the company had “elevated profits over compliance.”

Quicken, for its part, had taken the unusual step earlier in the week of suing the government for a declaration that its lending practices were proper and legal. In the latest salvo, Gilbert accused the feds of embarking on “a witch hunt” and demanding a “nine-figure” sum to settle the charges.

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“We have 30 years of work here and have built a reputation,” he told the Detroit News. “[For] the Department of Justice to come in because we happen to be a large lender and demand this kind of stuff is … I don’t know the word, is beyond comprehension.”

Gilbert called Quicken the “gold standard” of FHA-insured lenders and said the government is building a case by “cherry picking” evidence. “The bottom line is they went on a witch hunt,” he said.

The government’s complaint alleges that from September 2007 through December 2011, Quicken knowingly submitted, or caused to be submitted, claims for hundreds of improperly underwritten FHA-insured loans. The company encouraged its employees to disregard FHA rules and falsely certify compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages, according to the suit.

“Those who do business with the United States must act in good faith, including lenders that participate in the FHA mortgage insurance program,” a Justice Department official said.

In its own suit, Quicken said the case involved only 55 out of more than 246,000 loans and that the DoJ had threatened a high-profile lawsuit involving a much larger number of loans unless the company agreed to pay a large settlement.

The government has settled with several financial institutions over FHA lending practices, including JPMorgan Chase, U.S. Bank, SunTrust, and Bank of America.

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