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Quicken Loans, attling the Justice Department in a civil lawsuit involving its lending practices, gets a gut punch in an unrelated federal case.
On July 11, after five years in court, a federal judge in West Virginia ruled in in favor of a class action suit against the Detroit-based mortgage giant and fined it nearly $11 million, calling the company's practices "unconscionable" and "truly egregious."
The court found that Quicken Loans worked with home appraisers in order to inflate the value of homes during a period between October 2004 to March 2009 so the borrowers could qualify for a loan, reports Alysa Zavala-Offman of Metro Times. The lawsuit alleged that the company would give appraisers an estimated value of a property in advance so the appraiser would know what value it would take for a loan to go through.
The overstated values of the properties immediately put homeowners underwater on their loans, which could make their homes nearly impossible to sell in the future, the lawsuit alleges, according to Metro Times.
U.S. District Court Judge John Preston Bailey in West Virginia finds that Quicken’s conduct “flew in the face of prudent lending practices for the benefit of Quicken’s bottom line.”
Kenneth Harney of The Miami Herald writes:
Quicken Loans arguably has the mortgage industry’s squeakiest-clean image — named by J.D. Power as No. 1 in home loan customer satisfaction for seven years in a row and No. 1 in loan servicing for three years straight. It also has a reputation as a technology innovator; witness its heavily advertised and popular “Rocket Mortgage” option that cuts time and red tape for applicants.
So it might come as surprise that a federal district court last week levied nearly $11 million in fines and damages against the company for home owners who the court said were victims of an alleged appraisal tampering scheme by Quicken during the housing boom and bust years in West Virginia.
Quicken Loans disputed the allegations and said it plans to appeal.
The company told the Miami Herald that “there is no evidence” that provision of estimates of value in advance “impacted the opinion of local independent, licensed, professional home appraisers in West Virginia" and “there is also no evidence that the valuations the appraisers issued at the time were inflated in any way or caused any damages whatsoever to a single plaintiff in the class. The facts of this case are clear and we are confident that both the judge’s ruling and the damages assessed will be overturned on appeal.”
In the Miami Herald article, David Stevens, president and CEO of the Mortgage Bankers Association, defends Quicken. “It was a common industry practice during the time these loans were made to provide [an] owner’s estimate of value to appraisers, until the law changed nationwide in 2009,” he says.
Other mortgage experts tell The Herald it was common practice during that era, though some industry specialists disagree.
In another case, Quicken Loans is locked in a battle with the Justice Department, which has alleged in a civil suit that the company knowingly submitted claims for hundreds of improperly underwritten Federal Housing Administration-insured loans that ended up costing the government millions when the loans went bad. The loans involved inflated appraisals, poor credit risks and borrowers with insufficient incomes, the government claims.
The government wants to fine the Detroit lender, but the company insists that it has done nothing improper.