On April 17, Quicken Loans filed a preemptive lawsuit against the DOJ and HUD in the Eastern District of Michigan against HUD, the HUD-IG, and DOJ, asserting that it “appears to be one of the targets (due to its large size) of a political agenda under which the DOJ is “investigating” and pressuring large, high-profile lenders into paying nine- and ten-figure sums and publicly ‘admitting’ wrongdoing, including conceding that the lenders had made ‘false claims’ and violated the False Claims Act.” Specifically, the complaint alleged that HUD, the HUD-IG, and DOJ retroactively changed the process for evaluating FHA loans, from an individual assessment of a loan’s compliance, taking into account a borrower’s individual situation, the unique nature of each property, and the specific underwriting guidelines in effect, to a sampling method which extrapolates any defects found in a small subset of loans across the entire loan population, contrary to HUD’s prior guidance and in violation of the Administrative Procedures Act. The complaint further alleged that the sampling method used by the government was flawed, and asked for declaratory and injunctive relief against the government’s use of sampling. Quicken also asked the court to rule that the FHA loans it made between 2007-2011 in fact were “originated properly in accordance with the applicable FHA guidelines and program requirements, and pose no undue risk to the FHA insurance fund,” asserting that “HUD reviewed a number of these loans and, except in a few rare instances, either concluded the loans met all FHA guidelines or that any issues were immaterial or had been cured.”

Six days later, the government filed its own lawsuit against Quicken in the District of Columbia seeking damages and civil penalties under the False Claim Act. U.S. v. Quicken Loans Inc, No. 15-0613, (D.D.C. April 23, 2015). The government’s complaint alleges that from September 2007 through December 2011, Quicken knowingly approved loans that violated FHA rules while falsely certifying compliance with those rules. The complaint alleged that Quicken encouraged practices that “allow ‘exceptions’ to HUD’s underwriting requirements, requesting inflated appraisals, manipulating key data, pressuring underwriters to approve loans faster, paying prohibited commission to its underwriters for approved loans, and encouraging underwriters to disregard risks that were evident in the loan files.” The complaint also criticized Quicken’s quality control process, alleging that the lender “underreported the magnitude of underwriting deficiencies, failed to adequately assess compliance with FHA requirements, and failed to disclose Quicken’s underwriting failures to HUD.”