Gilbert also disputes claims that nonbanks are under-regulated. Moody's Investors Services upgraded Quicken's bond rating by a step in December, saying that "while profitability has declined from the exceptional levels of 20, we expect the company to continue to generate very strong profitability over the next several years." "We have more assets than 94 percent of FDIC-insured banks," he said.
Gilbert insists that Quicken is well-capitalized and less risky than many banks. Some market observers have raised concerns about the possible risks and dangers of nonbank mortgage lenders, contending that such firms are vulnerable to sudden dry-ups in their short-term credit lines. It is common for all mortgage lenders - banks and nonbanks - to process and sell their mortgages that way. It then pools the mortgages and bundles them into securities, which Quicken goes on to sell into the secondary market. Quicken runs the majority of the mortgages through the underwriting systems for the government-backed entities such as Fannie Mae. "We carry quite a bit on our balance sheet," he said. Instead, it can either borrow the money for the loans from banks, tap lines of credit or use its own cash, Gilbert said. Unlike traditional banks, Quicken can't rely on a base of customer deposits to make mortgages. "It's been very profitable for us to be a business in the city." How it works "There is no way we would be the company we are today spread out in the suburbs," he said. Back then, business involved "bringing doughnuts into real estate offices and hoping they give you a referral," he said. Gilbert started Quicken Loans, then known as Rock Mortgage, in 1985 with his brother and a friend. "The problem in this country is, if you're going to treat the bad guys the same as the good guys, you're not going to have a lot of good guys left," Gilbert said earlier this year.
Other lenders have scaled back or stopped doing FHA loans in recent years. Quicken continues to participate in the FHA mortgage program. Gilbert has strongly denied the allegations and, unlike other lenders, has refused to settle the case with a big payout to the government. A trial on the merits of the government's claims isn't expected to start until mid-2019 at the earliest. Department of Justice in federal court in a False Claims Act case alleging that, from 2007 through 2011, the firm fraudulently approved borrowers for Federal Housing Administration-backed mortgages. More recently, Quicken has been battling the U.S. And secondly, it’s not the right thing for the customer.” “You have to look at it through the eyes of ‘would you loan your money.’ That’s how I ask people to look at it," he added. "Because even if you could make some money in the short term and sell (the mortgage) off, we still have reps and warranties that we make, by the way, to whoever we sell to. I said, ‘We’re not doing these loans,’ " Gilbert said. "I remember our guys bringing us stuff, our guys being our bankers, saying, ‘Hey look, Countrywide is offering 100% loan-to-value loans for 580 (credit) score borrowers with no income verification. He recalled the significant industry pressure at the time to extend loans to unqualified borrowers. 1-ranked Countrywide Financial, disappeared. Gilbert has long insisted that Quicken did not partake in the subprime mortgage boom that culminated in last decade's market crash. He points to the company's survival through that era when numerous lenders, such as No. The rate on a 30-year, fixed-rate mortgage was 4.56 percent Thursday, up from 3.94 percent a year ago, according to Freddie Mac. The Mortgage Bankers Association forecast that refinancings will fall another 30 percent this year, following a 33 percent year-over-year drop in 2017. The shift also has resulted in lower mortgage origination volume across the industry.
1 could depend on its adjustment to the mortgage industry's shift away from mortgage refinancings. The number of refinancings has been plummeting nationwide as interest rates inch up. Most of Quicken's other loans are so-called jumbo mortgages, Gilbert said, which are those above $453,100 in value (or $679,650 in higher-cost regions) and therefore aren't eligible for government backing. About 95 percent of all Quicken's mortgages have explicit government backing through Fannie Mae, Freddie Mac, Ginnie Mae or the Federal Housing Administration, which generally insure loans against homeowner defaults.
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