Quicken Loans Banged for $11 Million Appraisal Fraud

Jul 19, 2017

It comes as no surprise that a tiny subsidiary of Quicken was getting kickbacks on appraisal fees and that the appraisals were “MAI” (Made As Instructed.” This is one of the lynchpins of the illegal scheme. The higher appraisals got everybody excited about a housing boom that was a complete illusion. As soon as lending stopped the prices went back down to fair market value using standard indices.

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see http://www.miamiherald.com/news/business/real-estate-news/article161759908.html

The only thing the Court and the reporters seem to have wrong is that they think Quicken was funding the loans. It wasn’t. It was collecting fees for acting as though it was funding the loan.

Quicken allegedly provided appraisers advance “estimates” of property values in assignments on home financings, effectively communicating the amounts Quicken needed to fund the loan. Plaintiffs in a class action suit affecting 2,770 homeowners said appraisers working for Quicken had overstated the market worth of their properties, putting them underwater on their loans from the start. One home-owning couple said in the original complaint that Quicken’s appraiser had reported their property was worth $151,000, significantly higher than its actual value of $115,500. The court determined that Quicken’s practices constituted “unconscionable” conduct under the West Virginia Consumer Credit and Protection Act.

The court also found that by “concealing” what it did, Quicken “deceived the plaintiffs.” U.S. District Court Judge John Preston Bailey called Quicken’s conduct “truly egregious” in that it “flew in the face of prudent lending practices for the benefit of Quicken’s bottom line.”

Read more here: http://www.miamiherald.com/news/business/real-estate-news/article161759908.html#storylink=cpy

What is truly incredible is the defensive statement issued by the Mortgage Bankers Association. “David Stevens, President and CEO of the Mortgage Bankers Association, defended Quicken, a prominent member of the trade group, arguing that “it was a common industry practice during the time these loans were made to provide [an] owner’s estimate of value to appraisers, until the law changed nationwide in 2009.”

There is so much wrong with that statement that it is hard to know where to begin. Let’s start with the kickbacks Quicken was getting during that period to a company that sometimes even appeared on the settlement statement.

Moving right along, the fact that it was common industry practice to issue false appraisals does not make this behavior acceptable, legal or even subject to explanation. During the construction boom in the 1960’s and 1970’s it was common practice to violate the building code. Large judgments and settlements followed.

And continuing along, why would any “lender” or even table funded representative of a “lender” want to over-appraise the value of property thus reducing the true value of the collateral and increasing the risk of loss? The answer is in their fees, which was the subject of this Judge’s ire. The more money Quicken moved the more fees were generated to Quicken without any risk of loss. If the loan went south, it didn’t matter. Quicken was making tis money on the front end.

The reason the law changed was because it had never happened before that widespread appraisal fraud was fueling the marketplace. A new law should have been unnecessary because under the old system, the appraisers wanted to be spot on so banks would trust them and the banks wanted to go with the lowest possible appraisal to maximize their safety in the collateral.

Pat Turner, an appraiser in Richmond, Virginia, said during the boom years, before federal appraisal reforms were enacted, lenders and loan officers weren’t shy about revealing the target value they needed to close a loan. In fact, he said, they got their message across far more bluntly than simply labeling the number needed as an “owner’s estimate.”

Major lenders “actually supplied [appraisers] with the figure needed to make the deal work,” he said. Frequently there was no subtlety about it. Some loan officers “would call appraisers and say: ‘If you can’t make the value, don’t do the appraisal.’” And if the appraiser told the loan officer that there was no way he or she could hit that value, the loan officer would threaten to withhold future assignments. “If you don’t make value you will never get another deal from us,” they would say, according to Turner.
Read more here: http://www.miamiherald.com/news/business/real-estate-news/article161759908.html#storylink=cpy

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