Quicken Loans Fined for Alleged Appraisal Tampering Scheme
Last week a federal district court in West Virginia levied an $11 million dollar fine against Quicken, an online mortgage company. The feds claim that Quicken engaged in an alleged tampering scheme during the housing boom/bust years in West Virginia.
Prosecutors allege that Quicken provided appraisers advance estimates of property values, which essentially communicated the exact amount of money that Quicken required in order to fund a loan.
In the class action suit, 2,770 plaintiffs said that the Quicken appraisers over-valued the worth of their property. This immediately put them upside down on their loans from the get go.
One couple stated in the complaint that their Quicken approved appraiser found that their property was worth $151,000, which was much higher than the actual value of $115,500.
The federal court said that practices of Quicken violated the West Virginia Consumer Credit and Protection Act.
U.S District Court Judge John Preston Bailey said: “Once an appraisal is tainted by the implication of influence over the appraiser, especially by the party compensating the appraiser, the resulting appraisal cannot by any established standard be fair, valid and reasonable.”
Judge Bailey went onto admonish Quicken by stating they “deceived the plaintiffs” and that their conduct was “truly egregious”.
Quicken gave a public statement in which they “strongly disputed” the decision and that they planned on appealing. In a statement given to the Miami Herald, Quicken said: “there is also no evidence that the valuations the appraisers issued at the time were inflated in any way or caused any damages whatsoever to a single plaintiff in the class. The facts of this case are clear and we are confident that both the judge’s ruling and the damages assessed will be overturned on appeal.”
The spokesman for Quicken went on to say: “Professional appraisers, who are subject to their own licensing and ethical standards, deliver independent valuations…the court labeled the borrower’s self-estimates of their homes value as a ‘target value.’”
Quicken has some supporters in their corner. David Stevens, CEO of the Mortgage Bankers Association defended their practices. He stated that it was common practice in the mortgage industry to provide an owner’s estimate of value to appraisers. In light of the housing crisis, a new law was enacted in 2009 that put a stop to this practice.
In his decision, Judge Bailey awarded each of the 2,770 members of the class action $3,500, which came out to around $9.65 million for violations of the West Virginia Consumer Credit & Protection Act. He also awarded $986,703 in damages total for “breach of contract” coupled with interest going back to June 2012.
The Judge stated that the “substantial penalty” would suffice to fulfill the spirit of West Virginia’s Consumer Credit & Protection Act – which was designed to protect consumers from “illegal and deceptive” lending practices.
The homeowners were represented in this class action suit by Jonathan Marshall and Patricia Kipnis of Bailey Glasser (Charleston) along with Jim Bordas and Jason Causey from the firm Bordas & Bordas based in Wheeling.