Quicken Loans settles with Federal Housing Authority in fraudulent lending case
Clare Duffy, CNN Business
(CNN) — The Justice Department on Friday dismissed a lawsuit against Quicken Loans, after the company agreed to a $32.5 million settlement with the United States government. The agreement resolved a years-long dispute over the company’s participation in a Federal Housing Administration lending program.
The government alleged in a 2015 lawsuit that Quicken Loans knowingly approved hundreds of loans insured by the FHA to unqualified borrowers. When the borrowers defaulted, the company profited off the loans — and cost the government millions, the complaint said.
Quicken Loans did not admit any wrongdoing as part of the settlement. Of the settlement funds, $25.5 million will go to recouping government losses, with another $7 million designated as interest on that amount, according to a statement Friday from a mediator who worked on the case, Judge Gerald Rosen.
“We have always been proud of our growing participation in the FHA program,” Quicken Loans CEO Jay Farner said in the statement. “Now that this dispute is behind us, we look forward to cultivating and expanding our relationship with both FHA and HUD so that we can increase Americans’ access to home financing and home ownership.”
The FHA, a government agency, insures mortgages to help banks lend to borrowers who might not be able to get loans otherwise. As a lending partner in the program, Quicken Loans was required to certify that borrowers met certain criteria that would lower risk of default. Instead, the government claimed, the company used inaccurate income statements and other tactics to approve unqualified borrowers.
The government has alleged that Quicken Loans broke federal rules by approving loans to unqualified borrowers from 2007 to 2011. The Justice Department began investigating the company’s lending practices in 2012.
In April 2015, Quicken Loans sued the Justice Department and federal housing officials over the investigation into its lending. The government filed its suit against the company days later.
In one example what the FHA said was inappropriate lending, the government’s suit described a situation in which Quicken allegedly certified a borrower based on income documentation that was nearly two years old. The suit alleged that the borrower became delinquent after one payment and that the government paid a $487,010.33 insurance claim as a result.
Quicken Loans said in 2015 it was the nation’s biggest FHA lender. The company remained part of the lending program despite the legal dispute and it will continue to participate following the settlement.
“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,” Amy Thompson, the assistant secretary for public affairs for the Department of Housing and Urban Development, said in the Friday statement.