Quicken Loans Changes Leadership Structure As ‘Lengthy Legal Battle’ Looms

Quicken Loans, the largest non-bank mortgage lender in the U.S., has named Jay Farner CEO of the company.

Farner, who was previously president and chief marketing officer, replaces Bill Emerson, the company’s long-standing CEO.

Emerson will immediately transition to the role of vice chairman of Rock Holdings, Quicken Loans’ parent company, the Detroit-based, online-only lender says in a press release.

In addition, Bob Walters, chief economist for the company, will now serve in the dual capacity of president and chief operating officer.

Emerson has been with Quicken Loans for 24 years. In his newly created position, he will continue to provide guidance to Quicken Loans but will also take an expanded role advocating for the mortgage industry and leading the growth of the culture across the entire Rock Holdings portfolio.

Farner will oversee all aspects of the business, while continuing to expand Quicken Loans’ leadership position in the fintech space.

Walters, who has spent 20 years at the company, will oversee the day-to-day operations of the business, focusing on strategic planning and leveraging synergies among the various teams at Quicken Loans.

It’s unclear whether any of the reshuffling of the company’s executive leadership is tied in any way to its ongoing litigation with the U.S. government regarding the alleged faulty underwriting of mortgages backed by the Federal Housing Administration (FHA).

In April 2015, the U.S. Department of Justice (DOJ) filed a complaint against Quicken Loans alleging that the lender improperly originated and underwrote mortgages insured by the FHA.

Interestingly, Quicken Loans, which was expecting the lawsuit, filed a preemptive lawsuit challenging the complaint about a week before it was filed in federal court.

All along, the company has denied any wrongdoing and has asserted that it followed FHA guidelines. Unlike other lenders that have settled similar complaints, the company has vowed to fight the allegations in court.

Dan Gilbert, chairman and founder of the company, has described the DOJ’s suit as “nonsensical” and “ludicrous” and said its FHA-backed loans are among the “highest quality” in the nation.

“The baseless and groundless government lawsuit has no merit,” Quicken told The Detroit News, according to a recent report. “There is nothing in the DOJ’s trumped-up, distorted claims worthy of prompting or causing Quicken Loans to change any of our underwriting practices.”

Quicken officials have said the lawsuit is tantamount to a shakedown by the DOJ. They contend the government “made a conscious, intentional decision to file claims against the largest FHA lenders because they are the largest lenders,” as per the Detroit News report.

The mortgage lender contends the government’s case is built on 55 “cherry picked” loans out of the 250,000 FHA loans Quicken closed from 2007 to 2011.

Quicken attorney Jeffrey B. Morganroth wrote in court papers filed last week that not only is Quicken Loans “the FHA lender with the highest-quality ratings [using the agency’s own measure],” but it also originates about 6% of all new FHA loans nationwide.

Quicken Loans won a notable legal victory in November when a federal court judge ruled that the DOJ’s case would be transferred from a federal district court in Washington, D.C., to a federal district court in downtown Detroit.

As per the Detroit News report, proceedings in the case were to begin today.

This could be just the beginning of a “lengthy legal battle” over whether Quicken failed to meet FHA underwriting guidelines, reporter Jennifer Chambers writes.

Both sides are to appear before U.S. District Judge Mark A. Goldsmith, first for a hearing on Quicken’s request to dismiss the case, then, if necessary, to go over a schedule of court dates leading to an April 11, 2019, trial date.

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