On a recent Saturday night, inside the Checker Bar & Grill in downtown Detroit, someone mentions the name of Detroit's most recognizable billionaire. A thirty-something gentleman sitting nearby, nursing a PBR, lets out an audible sigh and shakes his head, again and again.
"I hate that guy," he says, slowly.
That's a view of Daniel Gilbert, founder of online lending giant Quicken Loans, the public doesn't hear about too often. The barfly's feelings are likely grounded in a number of peculiarities: perhaps it's simply in disdain for Gilbert's public profile, that he's now synonymous with Detroit; or that he doesn't like the idea of one man having so much control over the direction the city will head in the coming years; or, there's the fact that a mortgage lender has risen from the ashes of the 2007 housing market collapse to become the city's biggest booster.
Gilbert, 52, who lives in the Oakland County village of Franklin, has ushered in a remarkable turnaround for Detroit's quiet downtown. The roughly 60 buildings he owns bustle with activity, and an estimated 12,000 employees (more than 2,500 of whom are Detroit residents) of his 110 companies now pay Detroit income taxes — including employees at Bedrock Real Estate Services, Fathead, and Greektown Casino. The timing of his decision to move his companies downtown was also fortunate for him: Detroit was pummeled by the financial crisis, bringing about a cascade of foreclosures and near rock-bottom prices for real estate. His efforts have helped shift the national spotlight on Detroit from municipal nightmare to the underdog everyone wants to see win.
Politics also appeared to make it an easy call: Thanks to then-Democratic Gov. Jennifer Granholm, the state and city agreed to cough up to $200 million in tax incentives over two decades to woo Gilbert's enterprise. Though many forget, Gilbert dangled the prospect of moving Quicken HQ to Cleveland, before conceding to the Cleveland Plain Dealer that it's "awfully hard to move 3,500 people."
Yet rarely do we get a glimpse into the skepticism of those like that guy on the barstool. One exception might be journalist Mark Binelli, who questioned Gilbert's good intentions back in February 2013, before the state appointed an emergency manager for Detroit and officials buckled and filed for municipal bankruptcy.
"Detroiters who are worried about ceding local power to Michigan's Republican governor shouldn't forget the ways in which power has already been ceded to an unelected oligarchy, whose members might, no matter how ostensibly well intentioned, possess questionable ideas about urban renewal," Binelli wrote.
It's no question Gilbert's profile has risen due to his successful efforts in bringing businesses into downtown. But it has also been aided and abetted by an adoring public, one that wants to see Detroit thrive like it did when the auto industry still reigned, by any means necessary.
With such a widespread presence, it becomes easier to see why some have wondered aloud if local media outlets themselves can maintain a healthy level of skepticism of Gilbert's efforts. Writing for the Columbia Journalism Review, Detroit-based journalist Anna Clark wrote that "local coverage of Gilbert reveals some solidly informative reporting, some glaring gaps, and the occasional cringe-worthy moment."
One of those glaring gaps, for instance, is what connection Quicken had with the housing crisis of 2007. When questions have been raised, the company has vehemently downplayed any role, bristling at any slight possibility Quicken's exalted name could take a hit.
Gilbert pushes back against any allegation by painting Quicken as one of the good guys of the industry, a lender that didn't mingle with the type of risky loans and bad practices that eventually generated economic catastrophe — especially in Detroit.
The devastating blow of the housing market crash in Detroit, where Quicken has closed $353 million in loans over the last nine years (most of which came between 2005 and 2008), was laid out in a 2009 report from the city's planning and development department:
Between 2004 and 2006, there was a total of 330,000 mortgages secured by properties in Detroit.
During that same period, 38,000 new mortgages were sold, of which 27,500 were considered subprime, or, "high cost loans ... with interest rates at least 3 percent above the typical rate." (Though the definition of subprime has varied, that essentially is a common standard in the industry for such risky loans.)
From 2005 to 2007, Detroit witnessed 67,000 homes fall into foreclosure, more than 20 percent of the total household mortgages.
By the end of 2006, the interest rate of approximately 29,000 adjustable rate mortgages in the city reset to a higher rate, "triggering higher payments for loan recipients." Between 2008 and 2010, 16,000 more would see their interest rates reset.
And the problems haven't gone away yet: A study released earlier this year found 47 percent of Detroit's homeowners remain underwater on their mortgages, meaning they owe more than their homes are worth. In 2013, 4,830 homes in the city went into foreclosure.
In the wake of the industry's implosion, Quicken emerged unscarred. Since the mortgage crisis dissipated, Gilbert has amassed an even larger fortune and the biggest stake — and subsequently, clout — in the way Detroit seeks to rebuild itself.
While doing so, the notion that Quicken escaped the foreclosure crisis without any stains on the company's record has been seemingly accepted by the public.
Reports and profiles of Gilbert attribute the reason Quicken escaped the economic collapse to the company's approach to business, and that it stuck with safe practices and safe products.
But lawsuits, federal settlements and records, and interviews with experts offer a conflicting perspective: It's not that Quicken wasn't hurt by the foreclosure crisis because it avoided risky loans — it wasn't hurt because it passed the risk off to others as soon as the loans were made.
A Tour of the (Mostly) Familiar
Quicken has some notable blots on its lending record: There's a $6.5 million settlement the company reached in 2009 with the Federal Deposit Insurance Corp. over loans it sold to the now-defunct IndyBank that turned sour. Quicken assumed no liability or wrongdoing.
There also remain a number of active lawsuits that accuse the company of lessening its underwriting standards for loans when times were good. At least one case showed a Detroit homeowner who faced foreclosure after securing his home with a complex loan from Quicken in 2006. It was a particular product that has earned the ire of consumer advocates and lawmakers in light of the housing industry's implosion.
What's interesting about the allegations, now seven years removed from the height of the crash, is Gilbert's continued insistence that Quicken exclusively slung quality product.
In a recent interview with Forbes (where he mused that "debt is what's going to kill you"), Gilbert said that Quicken avoided risky loan products and subprime borrowers.
To the casual observer, it would appear that these statements conflict with the image of the company Gilbert has portrayed to the public. It seemed prudent to reach out to Quicken to ask for some face-to-face time with Gilbert on the company's relationship with the lending industry during the boom years, especially considering the impact it had on the nation.
After three weeks of waiting, a Quicken spokesperson told us Gilbert wasn't available to chat by a deadline to meet in-person, Oct. 24. On Friday, Oct. 23, I sent along 23 questions, with the hope of receiving a response within the following week.
Apparently, that sparked a change of heart: Aaron Emerson, Quicken's director of communications, asked if I could come in on Halloween for a day's worth of interviews with multiple executives. The company would not send written responses to my questions.
The fact they wanted to devote an entire day's worth of resources for this story fascinated me. The day before my meet-and-greet, Emerson sent an itinerary for the day.
Oddly, the first hour-and-a-half was blocked out for a "tour" with the company's Detroit ambassador, Bruce Schwartz.