Citing “truly egregious conduct,” a federal judge imposed nearly $10 million in statutory damages against Quicken Loans and a group of appraisers as part of a class-action lawsuit alleging that Quicken Loans originated unlawful loans in West Virginia in a scheme with a number of appraisers.
The lawsuit alleges that Quicken Loans furnished appraisers with a target value and the appraisers produced appraisal values identical to the suggestions, regardless of the actual worth of the property. These potentially inflated appraisals meant borrowers might close on loans that were worth more than the collateral property.
The order notes that “Quicken has to this day never offered any legal or industry source that would indicate suggesting values to appraisers was considered a best or even valid lending practice.” The court found it compelling that in a 2005 West Virginia case, Herrod v. First Republic Mortgage, the West Virginia Supreme Court of Appeals had recognized the risk of underwater loans from this very practice.
After recounting the many indications that the conduct was improper, the court found that “[t]here was simply too much opinion and information condemning the practice of telegraphing a value to an appraiser for the defendants to hide behind ‘It’s not illegal.’” U.S. District Judge John Preston Bailey then imposed a statutory penalty of $3,500 per violation for the “unconscionable conduct” of Quicken Loans and its appraisers. There are more than 2,700 class members.
In the 74-page order resolving a number of motions, Bailey also refused several defense motions, including a motion to decertify the class, and a motion for summary judgment against certain class members. The court awarded summary judgment to plaintiffs on the issue of contract damages, to the tune of nearly $1 million.