In another escalation of Quicken Loans' ongoing clash with the government, the Department of Justice on Thursday filed a lawsuit alleging shoddy underwriting by the company.

The DOJ suit says Quicken knowingly submitted hundreds of improperly underwritten loans for Federal Housing Administration backing between September 2007 and December 2011 and encouraged employees to ignore FHA rules. The suit alleges Quicken green-lighted steps such as inflating the value of homes in certain cases to ensure loans met criteria for approval.

"Quicken issued hundreds of defective mortgage loans, and left [the Department of Housing and Urban Development] — and the taxpayer — to pay for the loans that defaulted," said U.S. Attorney John Walsh of the District of Colorado in a press release. Walsh's office had spearheaded the investigation. The government is asking for civil penalties totaling between $5,500 and $11,000 per violation of the False Claims Act.

The suit came less than a week after Quicken had filed its own suit against the DOJ, claiming the government was trying to pressure the company. "The company was left with no alternative but to take this action after the DOJ demanded Quicken Loans make public admissions that were blatantly false, as well as pay an inexplicable penalty or face legal action," Quicken said in a release announcing its lawsuit.

On Tuesday, Quicken Loans chief executive Bill Emerson gave public remarks at a National Association of Realtors forum in which he criticized the probe as an overreach and described DOJ's actions against large lenders as having "a chilling effect" on the FHA market.

"They wanted us to admit to things that were blatantly false," Emerson said. "They just want us to write a check."

But to further its argument that Quicken knew its actions were inappropriate, the DOJ released records of unflattering internal emails allegedly exchanged between employees of the company. In one message, an employee said, "We make some really dumb decisions when it comes to client service exceptions," according to DOJ's release. "Example, purchase loan we pulled new credit and the client stopped paying on almost everything and the scores fell by 100 points, we [still] closed it."

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