Mortgage Bankers Association on the Attack Against False Claims Act

The Mortgage Bankers Association is on the attack against the False Claims Act.

Bill Emerson

Bill Emerson

Here’s one reason — the chairman of the Mortgage Bankers Association is Bill Emerson.

And Bill Emerson is the CEO of Quicken Loans.

Earlier this year, the Justice Department filed a False Claims Act lawsuit against Quicken Loans Inc. for improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA).

Quicken Loans is fighting the lawsuit with a lawsuit of its own against the Department — claiming that the Department’s lawsuit was  “riddled with inaccurate and twisted conclusions from fragments of a handful of emails cherry-picked from 85,000 documents that the Department subpoenaed.”

“Worse than that, the Department appears to be basing their entire case on a handful of out-of-context email conversations skimmed from the communication between Quicken Loans employees,” Quicken Loans said in a statement at the time. “These conversations relate to a miniscule number of loans out of the nearly 250,000 FHA mortgages the company has closed over the past seven years.”

Quicken Loans is being represented by Morganroth & Morganroth in Birmingham, Michigan and Goodwin Procter in Washington, D.C.

Now, Mortgage Banker Association CEO David Stevens has launched an attack on the False Claims Act.

“Previously, if you originated a loan with mistakes in it — what we call defects — you might be exposed to indemnifying that loan if it went to default,” Stevens told the HousingWire this week. “But today, the Department of Justice is teaming up with the Inspector General and they are using the False Claims Act as a means of enforcing mistakes made in loan files with the FHA program. That’s using a bazooka on what might be even minor defects in loan files. It puts lenders at huge financial risk if they make a mistake in FHA loans.”

Patrick Burns of Taxpayers Against Fraud told Corporate Crime Reporter that instead of whining about law enforcement, the Mortgage Bankers Association should be apologizing to the American people.

“Crooked mortgage bankers cost scores of thousands of Americans their homes, their retirement, their savings, and their dreams, and they are still at it,” Burns said.

“This is an industry that is both unrepentant and rapacious.  And the fish stinks from the head down. The Chairman of the Mortgage Bankers Association is the CEO of Quicken Loans, a company that the U.S. Department of Justice filed suit against in April of this year for fraud.”

In its complaint against Quicken, the Department quotes an internal email in which that company’s Divisional Vice President for Underwriting notes that “40 percent of the management exceptions on FHA’s early payment defaults should not have been granted.”

In another email discussing an FHA loan, the Operations Director, a senior level executive, explained that the loan was approved based on “bastard income,” which he described as “trying to put some kind of income together that is plausible to the investor even though we know its creation comes from something evil and horrible.”

“And it’s not just Quicken Loans that’s the problem, nor is it just FHA or HUD loans that are in the swing,” Burns said.

“Wells Fargo is now facing allegations they defrauded Veterans Administration refinance loans by illegally bundling fees and adding banks costs to the amount paid and financed by veterans.  Five other mortgage banks have already settled similar claims, but Well Fargo has the lion’s share of the damages.”

“These kind of bank fraud cases do not involve ‘simple mistakes.’ These cases are built on intentional actions occurring in multiple states, simultaneously, over a decade, and they involve thousands of fraudulently obtained government guarantees.”

“This is old-fashioned lying, stealing and cheating in its basest form – the kind that almost brought our economy to its knees in 2008,” Burns said.

In April, Quicken Loans beat the Department of Justice to the courthouse and sued the Department first claiming that “the company was left with no alternative but to take this action after the Department demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action.”

“After three years of struggling to understand the Department’s position and methodology that would warrant the country’s largest and highest quality Federal Housing Authority (FHA) lender to make untrue admissions and pay an inexplicable penalty or face public legal action, it is time to ask the court to intervene,” said Emerson said at the time. “No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its leadership from doing the right thing. We will stand in defense of our impeccable reputation established by thousands of hard-working ethical team members over our 30-year history.”

“It’s a shame the Department would choose to attack the country’s largest and highest quality FHA lender providing government lending for homebuyers and homeowners across all 50 states at the very time our nation needs expanded access to credit for middle-class Americans who benefit most from the FHA program.”

“The Constitution provides for checks and balances among the three branches of government. We are hopeful and confident that after examining the facts, the judicial branch will exercise their authority to provide just relief from this misuse of power,” Emerson said.

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