With the court battle between Quicken Loans and the U.S. Department of Justice (DOJ) over the company’s handling of government-backed mortgages looming on the docket, Quicken appears to be signaling an exit from the U.S. Federal Housing Administration (FHA) mortgage loan program.
Dan Gilbert
According to an exclusive Reuters report on Dec. 1, Quicken Chairman Dan Gilbert said the company is “looking at bowing out” of offering FHA loans to borrowers and “considering cutting the risk it takes in the program.”
That’s due to a lawsuit that Quicken filed April 17 against the federal government for allegedly trying to strong-arm it into a hefty settlement over its handling of FHA-backed mortgages. The DOJ had been investigating Quicken for nearly three years as part of an ongoing probe of other top mortgage lenders for allegedly originating defective loans in the run-up to the financial crisis.
Three other lenders — Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co. — agreed to scale back their lending through FHA to resolve similar government concerns with their practices.
But Quicken has refused to acquiesce, maintaining that although it was one of the largest FHA lenders in the country, with the lowest FHA loan default rate, the DOJ was pressuring it into making public admissions that are “blatantly false,” and paying penalties to avoid the department taking legal action.
The DOJ filed its own lawsuit a week after Quicken’s action, accusing the lender of submitting insurance claims for hundreds of improperly underwritten FHA-insured loans over a period of four years. Both suits are still pending.
A spokesman for Quicken told Inman that the company does not wish to comment further on Gilbert’s statements, adding, “the Reuters article accurately states our position.” But Gilbert’s comments to the news service are not the only sign that Quicken may be contemplating an exit from the FHA program.
As reported by Inman on Oct. 22, the lender has teamed up with Freddie Mac to offer low-down-payment mortgages and other services to some underserved borrowers.
The deal is not a major move for Quicken, as it was already offering Freddie Mac’s Home Possible and Home Possible Advantage mortgages. But a Freddie Mac spokesman said, “There will be some tweaking to those products and to mortgage insurance to make homebuying more affordable to borrowers,” by allowing eligible borrowers to finance homes with down payments of as low as 3 percent. FHA loans require a 3.5-percent down payment.
