A federal judge on Monday agreed to move the Justice Department’s lawsuit against Quicken Loans Inc. out of Washington, D.C., and to the mortgage lender’s hometown in Detroit, a decision the Dan Gilbert-owned company had sought for months.
U.S. District Court Judge Reggie Walton said in an opinion that the Eastern District of Michigan courthouse in downtown Detroit would be a more appropriate and convenient venue for the fraud allegations against Quicken Loans to be heard.
He agreed with Quicken’s arguments that Detroit is a better location because all of Quicken’s files as well as its employees in the case are situated there. The judge did note how the “relative congestion” of the federal docket in Detroit did weigh against arguments for the transfer, “but not by much.”
The median time for a case from start to finish is eight months in the District of Columbia, versus 11.7 in the Eastern District of Michigan, the opinion said.
The Justice Department contended that Washington was better because nearly all of its own witnesses are based there.
The Justice Department filed the lawsuit against Quicken Loans in April 2015, alleging that the lender knowingly submitted or caused the submission of hundreds of improperly underwritten loans from 2007 to 2011 that were insured by the Federal Housing Administration.
By causing home values to be exaggerated or not making sure borrowers could afford their FHA mortgages, Quicken cost the government — and ultimately the taxpayers — millions of dollars in payouts under the guaranteed loans, the Justice Department claims.
Quicken Loans strongly denies all of the fraud allegations and has characterized the government’s action as an attempt to strong-arm the company into a big financial settlement.
Quicken filed its own preemptive lawsuit against the Justice Department just days before the government’s current lawsuit. That suit also sought to have the primary case heard in Michigan. However, a federal dismissed the preemptive action last December.
Gilbert, who is Quicken’s founder and chairman, praised Monday’s decision to bring the case to Detroit.
“I can’t say whether Detroit would be more or less sympathetic,” Gilbert said in a phone interview, “but it’s certainly the right venue because all the potential witnesses are here, all the 16,000 people who work in the business where the loans are underwritten are here.”
In an official statement, Gilbert said it is odd that the government is going after Quicken, considering how the company has had “the FHA’s lowest delinquency and default rates in the nation for years, resulting in billions of dollars of profits to the FHA insurance fund.”
“It is obvious the DOJ made a conscious decision to exert pressure on the largest lenders in the country, using the weight of the federal government and its endless capacity to bring lengthy litigation and corresponding reputational damage without regard for the actual validity of its claims. DOJ’s strategy was deployed for the sole purpose of extracting large settlements,” Gilbert said.
Gilbert in the phone interview said that Quicken, for now, will continue to participate in the FHA program and not pull out like other large mortgage lenders have.
“As of now we’re going to stay in the program,” he said. “These loans perform, which is good for the borrowers and the lenders.”
Asked how long he thinks the lawsuit will drag on in federal court, Gilbert said that is hard to predict.
“I think the first time they sent us a subpoena was in 2012; we’re coming up on five years already,” Gilbert said. “I’d be surprised if we’re halfway through at this point.”
