Quicken Loans is now finally able to move past its beef with the Department of Justice over the nonbank’s FHA lending practices, as a mediator for the two parties announced Friday that they had finally reached a resolution.
Without any admission of guilt or determination of wrongdoing on either side, Quicken has agreed to pay the government $32.5 million to resolve claims that it violated the False Claims Act by “knowingly” submitting hundreds of “improperly underwritten” loans for FHA mortgage insurance.
According to the mediator, $25.5 million of that sum will go to the government “for any losses it may have incurred,” while the remaining $7 million will be paid in interest.
The agreement puts the mortgage lender’s highly contentious dispute with the Department of Housing and Urban Development and the DOJ to rest, settling a case that was widely discussed in the mortgage industry for shedding a bright spotlight on the Obama administration’s practice of pursuing FHA lenders under the False Claims Act for allegedly originating mortgages that were not up to FHA standards.
It all began back in 2015 when Quicken sued the DOJ and HUD for allegedly demanding the nonbank make public admissions that were blatantly false, and requiring it to pay an inexplicable penalty or face legal action over a pool of FHA loans that were brought into question.
The DOJ then retaliated, formerly accusing Quicken of False Claims violations, alleging that Quicken instituted an underwriting process that encouraged employees to disregard FHA rules and falsely certify compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.
Quicken denied those charges and vowed to fight them. Its former CEO, Bill Emerson, told HousingWire in 2015 that the government’s efforts to extract a settlement were 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.”
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.
The Trump administration has backed off that strategy, with both FHA Commissioner Brian Montgomery and HUD Secretary Ben Carson saying that the administration will no longer pursue FHA lenders for alleged False Claims violations.
The government’s case against Quicken was set to go to trial in August, with the lender pledging to “fight to the end,” but it seems the parties’ last-ditch effort to settle through mediation worked.
Both released statements saying they were pleased to finally settle the matter and move on.
“We have always been proud of our growing participation in the FHA program. Every day teachers, police officers, factory workers and so many others who are the backbone of our communities, utilize Quicken Loans for this very important loan program,” said Quicken’s current CEO, Jay Farner.
“Now that this dispute is behind us, we look forward to cultivating and expanding our relationship with both FHA and HUD so we can increase Americans’ access to home financing and home ownership,” Farner added.
“Today, HUD reached an important resolution with Quicken Loans so that, together, we may continue offering safe and sustainable mortgage financing to qualified, creditworthy borrowers,” said Amy Thompson, HUD’s Assistant Secretary for Public Affairs. “FHA relies on its partnerships with lenders, such as Quicken Loans, to advance home buying opportunities for Americans, and we look forward to continuing our relationship with Quicken Loans.”
