Mortgage lender Quicken Loans prides itself on fast and easy service, but are all those loans really legal? Maybe you’ve seen the company’s Rocket Mortgage commercial, which promises home loans in as fast as 8 minutes.
After the commercial aired at the 2016 SuperBowl, it was widely criticized for its depiction of families making potentially hasty financial decisions. Quicken Loans refuted those claims, but the fact that the company is facing a federal lawsuit for mortgage fraud doesn’t really help its case.
Allegations Against Quicken Loans
Mortgage fraud was one of the major instigators of the 2008 financial crisis. Though some feel the fault lies with borrowers who purchased houses outside of their means, the banks that gave them loans are certainly to blame. After that crisis, many banks have been under scrutiny for their lending practices. If they routinely give out bad loans, they could easily trigger another housing crisis.
In traditional mortgages, underwriters evaluate the ability of the buyer to meet the terms of the lender. The underwriter looks at potential risk factors like a poor credit score or past bankruptcy. He or she also evaluates the property value to make sure it isn’t out of the homebuyer’s reach. In the type fraud scheme of which Quicken Loans is accused, the underwriting process is fudged and buyers are given loans even if they are technically ineligible.
Quicken Loans is one of the top lenders of home mortgage loans. Headquartered in Detroit, it is one of the most prominent companies in the city. Quicken Loans is known for simplifying the lending process and cutting out the middleman for homebuyers. According to a False Claims Act Lawsuit, however, that speed may have come at a price.
From 2007 to 2011, Quicken Loans allegedly lied about home values in order to guarantee loans for its users. The Department of Justice filed an FCA lawsuit against the company in 2015, also alleging that Quicken Loans lied about borrower eligibility. The company could have hurt taxpayers with this scheme, because the mortgage loans were insured by the Federal Housing Administration.
In fact, no other lender is a greater participant in the Federal Housing Administration’s insurance program. If borrowers defaulted on their loans, taxpayers were on the hook for that financial loss. If a large quantity of Quicken Loans were fraudulent, that could mean immense losses for the American public.
Though the lawsuit against Quicken was filed on a federal level, the company managed to have it transferred to its hometown of Detroit. This could be an advantage to the company, which has repeatedly denied any wrongdoing.
In addition, a judge dismissed a portion of the lawsuit, only allowing loans from a two-year period to be included in the allegations. Still, if Quicken Loans is found to have violated the False Claims Act, it could be fined three times the amount it allegedly defrauded.
The lawsuit is scheduled to go to trial in 2019; statements from Quicken Loan indicate that the company plans to fight the allegations all the way through rather than settling, as other large companies have chosen to do.
The False Claims Act and Mortgage Fraud
The majority of False Claims Act cases target healthcare fraud, but the law applies to any false claim made at the expense of the federal government. Most states have their own version of the law that help recover state funding from local fraudsters. Though it may seem that private companies like Quicken Loans being completely separate from the government, the reality is that most major industries rely on government funding in one way or another.
The False Claims Act is designed to protect the taxpayers that fund government programs from fraud, waste, and abuse of their hard-earned cash. Any company that deliberately or negligently violates the law can be forced to pay back what they owe and then some. Fraudulent companies can also be barred from receiving future federal reimbursements, though that rarely happens.
Beyond the legal repercussions of mortgage fraud, it can devastate the entire economy, as we all witnessed several years ago. Whether Quicken Loans is found guilty or not, lenders should beware that when they take advantage of taxpayers they will be held accountable.
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