A federal judge in Detroit rejected a motion last week by Quicken Loans to toss a False Claims Act (FCA) complaint alleging that it knowingly approved mortgage loans that did not meet the qualifications for FHA insurance.
In his Feb. 9 ruling, U.S. District Judge Mark Goldsmith allows the FCA suit against Quicken Loans to advance, but reduced the time-frame by nearly half due to the statute of limitations.
The U.S. Department of Justice (DOJ) brought the complaint against Quicken Loans, alleging that the ignored “red flags” in risky home loans that failed to meet federal standards for FHA insurance. The company’s loans also involved inflated appraisals, poor credit risks, borrowers with insufficient incomes, and miscalculated incomes, the lawsuit alleges, according to The Detroit News.
The company had a “culture of bending the rules” and gave “speed bonuses” to underwriters that pushed mortgages through the approval process quickly, The Detroit News reported.
“The allegations in the complaint support an inference that (the) FHA would not have insured the particular loans at issue in this case had it known of Quicken’s alleged non-compliance with underwriting requirements,” Judge Goldsmith wrote.
The judge, however, ruled that the statute of limitations allows only some of the government’s claims to stand. The Justice Department alleges in its suit that the fraudulent loan activity occurred between Sept. 1, 2007, and Dec. 31, 2011, but claims from April 23, 2009, can move ahead, Judge Goldberg found.
The faulty mortgage loans Quicken closed cost the government millions of dollars when borrowers defaulted, the government’s False Claims Act lawsuit asserts.
Quicken Loans disputes the government’s claims and contends that the federal prosecutors have “cherry-picked” a handful of bad mortgage loans out of thousands. According to The Detroit News, Dan Gilbert, the founder and chairman of Quicken, has said the company won’t settle.
Source: The Detroit News