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The shift in market composition is fueling concerns that if defaults rise, the Federal Housing Administration would have a harder time making lenders eat the losses on poorly underwritten loans.
April 6
WASHINGTON The Department of Justice has "hijacked" the Federal Housing Administration home loan program in efforts to punish lenders that don't make perfect loans, Quicken Loans chief executive Bill Emerson said at a forum this week.
Emerson's comments came on the heels of his company's filing a lawsuit against the government to preemptively stop a DOJ probe into Quicken's FHA lending program. The DOJ is demanding that the lender admit to making defective loans and violating the False Claims Act.
But Emerson noted that the government is not singling out the bad actors in the FHA program, which "takes a lot of time and a lot of work and a lot of effort." Rather, he said, DOJ is just going after the largest FHA lenders. Both the DOJ and Department of Housing and Urban Development have recovered billions in recent settlements from banks including Bank of America, Citigroup and JPMorgan Chase.
"They wanted us to admit to things that were blatantly false," Emerson said Tuesday at the housing forum held by the National Association of Realtors. "They just want us to write a check."
Emerson said the DOJ's pursuits of FHA-related claims against industry leaders are having a "chilling effect on the market."
"We have seen a lot of large institutions back away from that program," he said. "The risks associated with doing a FHA loan today are just too high." (Quicken Loans is one of the largest originators of FHA-insured loans.)
Emerson also said the FHA needs to make more progress in providing guidance on policy toward loan repurchases. He said by comparison the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has worked hard to "bring some clarity to rules of the road."
He said the industry needs more clarity from the FHA on what is material in the loan repurchase process and how loan repurchases are to be certified. Currently, "when you sign the certification you are saying the loan is perfect and has no defects, which is not possible."
