A year after Gilbert announced that Quicken Loans would move its operations from Livonia to the then struggling downtown Detroit, the housing market began to collapse in mid-2008.
Quicken Loans had grown from a nascent non-bank mortgage transaction to a major player filling a void left by its larger competing banks that fell victim to their role in the subprime mortgage catastrophe and subsequent federal fines and regulations.
“Quicken deserves credit for being in the right place at the right time and having the right business model, but it would never have reached this point without the housing crisis,” said Guy Cecala, CEO and publisher of ‘Inside Mortgage Finance. “Most of the big banks were involved in subprime mortgages and pulled out of the mortgage market after the crisis. They were fed up with government regulations on FHA, Fannie and Freddie loans. But loan compliance was a real issue. asset for non-banks like Quicken. ”
Quicken Loans was not alone in the non-banking space. California-based PennyMac Financial, formed by former executives of a major venture lender, Countrywide, and Loandepot.com have all started to grab market share from traditional banks.
Quicken Loans had succeeded where banks had failed – using a much lower overhead centralized call center approach that could turn mortgages at a much faster rate than the traditional method of getting to your local bank branch.
“Very few lenders have been successful with the call center business model,” Cecala said. “Quicken has succeeded in becoming the largest retail lender without the thousands of retail offices.”
But his non-traditional approach to mortgages has not come without scrutiny. The US Department of Justice filed a complaint in 2015, claiming that Quicken Loans issued hundreds of FHA-backed loans between September 2007 and December 2011 when they were not eligible for the program due to the fact that the Quicken Loans lenders had overestimated a borrower’s income so that he could qualify. for loans. The DOJ also maintains that the US Department of Housing and Urban Development paid $ 500 million in claims on 3,900 loans approved by Quicken Loans.
Gilbert swiftly took legal action against the government days before the DOJ filed its complaint, alleging the government violated the Administrative Procedure Act in the investigation and argued that the government improperly guessed a pattern of violations. based on a sample of loans guaranteed by FHA through Quicken Loans, rather than looking at all loans individually.
“Quicken is the redhead half-sister of the mortgage market because it’s a non-bank organization and Dan Gilbert is seen as a maverick. It gets the attention of regulators, I guess,” Cecala said. “But Dan Gilbert never met a lawsuit he wouldn’t fight.”
Quicken Loans lost its lawsuit against the government, while the DOJ’s case against the company is still ongoing.
“No threat, including high-profile senseless lawsuits from powerful federal officials, will deter our company and its executives from doing the right thing,” Quicken Loans said in a 2015 statement. “We will stand up for our reputation. impeccable established by thousands of hard-working ethics team members … “
Farner is quick to point out that Quicken Loans has a low delinquency rate.
“We have a long history of producing the best quality loans across the country with the lowest default rates and have been independently named the lender with the best customer service for almost a decade,” said Farner. in an email. “We are a 34-year-old organization of 17,000 employees who take pride in our track record.
Farner declined to discuss income or income from Quicken Loans. Rock Ventures LLC, the parent company of Quicken Loans and other Gilbert companies, generated $ 6.56 billion in revenue in 2017, according to Crain’s estimates.