The Justice Department is suing Quicken Loans, saying the lender approved hundreds of mortgage loans that didn't meet federal standards, leaving the government stuck with the bill when borrowers defaulted.
The U.S. Department of Justice said Thursday that between September 2007 and December 2011, Quicken approved, underwrote, and certified the insurance of hundreds of mortgages that didn't meet federal guidelines.
It said Quicken encouraged its employees to disregard Federal Housing Administration rules and say that mortgages met the guidelines when they did not. Quicken sometimes asked appraisers to inflate the value of homes so it could approve the loans, and managers sometimes let underwriters break FHA rules to approve loans, the department said.
The loans were insured by the U.S. Department of Housing and Urban Development, and Quicken filed for reimbursement when the loans defaulted. According to the Justice Department, HUD has already paid millions of dollars in claims on the loans Quicken underwrote, and there could be more claims coming.
Quicken sued the federal government Monday, saying it had done nothing wrong and that the government was trying to get it to admit wrongdoing and pay big penalties for political reasons. The company says it is the second-largest mortgage lender in the U.S. and the largest lender of loans guaranteed by the FHA. It says it was notified about a government investigation three years ago.
The Detroit-based company was a direct endorsement lender approved by the FHA, which meant FHA and HUD did not review the loans before the FHA insured them.