After seeing an online pop-up ad for Quicken Loans, Lourie Brown
of Ohio County, West Virginia contacted the Detroit-based mortgage company hoping to refinance. At closing, she received a whopping $41,000, and by consolidating other debt, she was able to save herself $300 a month.
But what she didn't know was that after making 360 mortgage payments, she'd owe the company a balloon payment of over $100,000. Furthermore, her new mortgage was based on a fraudulent appraisal that valued her home at almost $145,000. In reality, the residence was worth closer to $46,000 — which put Brown underwater for more than four times its actual value.
Brown sued Quicken Loans and in 2011 a judge ruled in her favor, awarding her over $2 million in punitive damages and demanding the company pay her lawyer fees in excess of half a million dollars.
But Brown's experience is more common than homebuyers might like to think.
Earlier this month, a federal court ruled that Quicken Loans
worked with supposedly independent home appraisers in order to jack up the value of homes during a period between October 2004 to March 2009.
In a class action lawsuit filed in 2012 in the Northern District of West Virginia, plaintiffs alleged the Quicken Loans officers worked intentionally to broker illegal loans in excess of fair market value, which directly violates West Virginia's Residential Mortgage Lender, Broker, and Service Act.
According to co-lead attorney Jason Causey, this type of conduct was ubiquitous at Quicken Loans during the time period.
"The practice was consistent with Quicken Loans' national practice as far as we know," Causey told MT
According to court filings, Quicken Loans' loan officers schemed to inflate property values by providing appraisers with an "owner's estimated" value in advance in order to communicate the amount the company needed to fund the loan.
On average, homes involved in the class action lawsuit were appraised within 5 percent of the Quicken Loans supplied "owner's estimate," Causey says.
The overstated values immediately put homeowners underwater on their loans, which could make their homes nearly impossible to sell in the future, according to the plaintiffs.
On July 11, after five years in court, the court ruled in favor of the plaintiffs and slapped Quicken Loans with a nearly $11 million fine — but not before calling the company's conduct "unconscionable" and "truly egregious."
In a statement to the Miami Herald
, Quicken Loans continued to deny their loan officers participated in such predatory behavior and promised to appeal the case.
Causey says following the July 11 ruling, individual plaintiffs will now have an opportunity to seek personal damages. He believes litigation will likely continue for at least another 18 months.
A Quicken Loans representative said there is "no evidence" the estimates loan officers provided to home appraisers had any impact on their final valuation. Furthermore, they told the Herald
there's no evidence the appraisals caused damage to any of the plaintiffs.
"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," they told Miami Herald.