Dan Gilbert. (Photo: Deadline archive)
Dan Gilbert
Updated: Thursday, 9:15 p.m. -- Quicken Loans issued a response. (See below)
A Detroit federal judge on Thursday denied Quicken Loans' request to dismiss a federal lawsuit by the Justice Department, setting the stage for a high-stakes trial if an out-of-court settlement can't be reached with Dan Gilbert's company.
The Justice Department filed the case in April 2015, alleging that the Detroit-based mortgage giant ignored red flags on bad home loans that cost the government millions of dollars. Quicken Loans has refused to reach a settlement, insisting it has done nothing wrong.
Quicken Loans did score a partial victory. U.S. District Judge Mark Goldsmith ruled that the government cannot go after any loans before April 23, 2009 because of the statute of limitations.
In April 2012, the Department of Justice and the HUD Office of Inspector General began investigating Quicken under the False Claims Act, and focused on approximately 246,000 loans from mid-2007 through December 31, 2011.
Federal prosecutors allege in the government lawsuit that the company knowingly and fraudulently 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.
Updated: Quicken Loans issued a press release responding to the court ruling. Here's part of it:
The government sued Quicken Loans in its systematic program that aggressively pursued all large FHA lenders irrespective of underwriting quality and loan default performance. The DOJ's successfully forced large settlements from their victims using the heavy weight of the federal government.
Quicken Loans is pleased the court recognized that portions of the Justice Department’s overreaching lawsuit against the company exceeded the bounds of legality and were dismissed narrowing the claims significantly in terms of timeframe and scope.
Quicken Loans is eager and more than prepared to prove to a jury that any remaining allegations are completely and totally false.
"Quicken Loans is and has been the FHA's gold standard when it comes to underwriting quality and loan performance for FHA loans nationwide. Not only have we had the lowest default rates of any FHA lender in the country but we have done so while at the same time leading the nation in FHA closed volume and market share" said Bill Emerson, Vice Chairman of Quicken Loans."
