Quicken Loans founder Dan Gilbert, whose company is entangled in a mortgage fraud case with the Justice Department, contributed $750,000 to Donald Trump’s presidential inauguration in January.
Just two weeks before the inauguration, Gilbert told Bloomberg Television that he believes Trump’s Justice Department will be “reasonable” and drop the lawsuit, which was filed in 2015 following a three-year investigation under President Obama’s administration. Gilbert called Obama’s Justice Department an “out-of-control” agency that is “going after businesses and shaking them down.”
The lawsuit alleges the Detroit-based company approved risky mortgages that violated federal guidelines because of inflated home values and underreported incomes and credit scores. Quicken Loans was one of the top providers of mortgages in Detroit, about a third of which went belly up between 2000 and 2014, contributing to blight in the neighborhoods, according to a Detroit News investigation.
The lawsuit alleges Quicken Loans cost taxpayers million of dollars when the mortgages went sour.
A lot of money is at stake. In April 2016, Wells Fargo agreed to pay $1.2 billion in a settlement with the Justice Department over similar allegations.
In November, a month after Gilbert attended a secret, $25,000-a-plate fundraiser for Trump in one of his downtown Detroit buildings, the president-elect appointed a high-ranking Quicken Loans employee to the Department of Housing and Urban Development (HUD) transition team. The appointment sent up red flags because Quicken Loans is now the largest underwriter of mortgages backed by the Federal Housing Administration, which is run by HUD. Quicken Loans also is accused in the federal lawsuit of misleading the FHA in order to qualify for the administration’s mortgage insurance.
The appointee, Quicken Loans Executive Vice President of Government Advocacy Shawn Krause, was registered to lobby HUD, Congress and other federal regulators, according to a disclosure form filed Nov. 18.
Quicken Loans denied there was a conflict of interest.
“It makes total sense you’d have someone like that. You’re finding people that actually understand housing,” Bill Emerson, Quicken’s chief executive, told Realtor.com. “When you think about draining the swamp, this goes right in line with that.”
A few days before the federal government sued Quicken Loans, the company filed a preemptive lawsuit against HUD and the Justice Department, claiming it was pressured to “make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action.”
A federal judge dismissed Quicken’s lawsuit in December 2015.
Quicken Loans is now the second-largest mortgage lender in the country. While many of the nation’s largest banks curtailed mortgage-lending activities since the 2008 economic crisis, Quicken Loans has done the opposite, originating $96 billion in mortgages last year.
In early 2016, the National Labor Relations Board ruled that Quicken Loans and five other Gilbert-owned business violated federal labor laws with threatening language in a “confidential” employee handbook that prevented the formation of unions and censored workers.
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Steve Neavling lives and works in Detroit as an investigative journalist. His stories have uncovered corruption, led to arrests and reforms and prompted FBI investigations.