United States of America v. Quicken Loans Inc. (239 F. Supp. 3d 1014, 2017)

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT QUICKEN LOANS INC.’S MOTION TO DISMISS (Dkt. 15)

MARK A. GOLDSMITH, United States District Judge

In this case, the Government alleges that Defendant Quicken Loans Inc. underwrote, approved, and endorsed certain mortgage loans for Federal Housing Administration (“FHA”) insurance between September 1, 2007 and December 31, 2011, and that those loans allegedly violated FHA underwriting requirements. The Government further alleges that, by falsely certifying compliance with those requirements and submitting claims for payment when those loans defaulted, Quicken violated the False Claims Act, 31 U.S.C. § 3729 et seq, The Government also asserts federal common-law claims against Quicken for breach of fiduciary duty and negligence.

This matter is before the Court on Quicken’s motion to dismiss (Dkt. 15). The issues were briefed, and a hearing was held on February 13, 2017. For the reasons explained fully below, the Court grants the motion in part and denies it in part.

I. BACKGROUND

The FHA is an entity within the United States Department of Housing and Urban Development (“HUD”), which insures mortgages and administers several mortgage default insurance programs. Quicken Loans Inc. v. United States, 152 F.Supp.3d 938, 942 (E.D. Mich. 2015). As a mortgage insurer, the FHA agrees to protect mortgage lenders against the risk of loss caused by borrowers’ non-payment, as authorized by the National Housing Act of 1934, 12 U.S.C. § 1701 et seq. Quicken Loans, 152 F.Supp.3d at 942.

Oné of the programs through which FHA insures home mortgages is the Direct Endorsement Lender (“DEL”) program. In the DEL program, FHA authorizes certain lenders to evaluate the credit risk of potential borrowers, underwrite mortgage loans, and certify those loans for FHA mortgage insurance without prior HUD review or approval. Id. (citing 12 U.S.C. § 1715z-21). “In underwriting the mortgage loan, the lender must determine whether the borrower and the mortgage loan meet HUD’s requirements for FHA insurance and whether ‘the proposed mortgage is eligible for insurance under the applicable program regulations.’” Id. at 942-943 (quoting 24 C.F.R. § 203.5(a)). Once a loan is endorsed by HUD or the DEL lender, it is insured by the FHA. Compl. ¶ 92 (Dkt. 1). If there is a mortgage default, the holder of the mortgage note (whether the original lender or a later transferee) submits an insurance claim to HUD for any loss from the default via an electronic claim system and, in compliance with applicable rules, receives payment from the United States Treasury after the claim is approved. Id ¶¶ 93-95.

A lender may underwrite an FHA-insured loan in one of two ways: (i) the underwriter may “manually underwrite” the loan, by making the credit decision whether to approve the borrower, in accordance with HUD underwriting rules; or (ii) the lender may use a HUD-approved Automated Underwriting System (“AUS”), which is a software system that makes the credit recommendation whether to approve the borrower, Id. ¶ 60.

Beginning in July 2008, HUD required DEL lenders to electronically process eligible loan requests through an AUS. Id. ¶62. The AUS connects to a proprietary HUD algorithm known as Technology Open to Approved Lenders (“TOTAL”). Id. Using the data that the lender inputs into the AUS, the TOTAL algorithm makes a credit determination and provides either an “Accept/Approve” decision, which approves the loan subject to certain conditions, or a “Refer” decision, which refers the loan back to the. lender for manual underwriting. Id. A loan receiving a TOTAL “Accept/Approve” decision is only eligible for FHA’s insurance endorsement if the data entered into the AUS is true, complete, properly documented, and accurate. Id. ¶ 65.

For each individual mortgage loan approved for FHA insurance, the lender must make a “loan-level” certification that the individual mortgage “complies with HUD rules and is ‘eligible for HUD mortgage insurance under the DEL program.’ ” Id. ¶ 87 (quoting Form HUD-92900-A). By certifying the mortgage for FHA insurance, the mortgage lender agrees to indemnify HUD for claims paid out to the lender in certain circumstances. 24 C.F.R. § 203.255(g)(1). However, the certifications are different depending on whether the loan was manually underwritten. or the lender used an AUS. Compl. ¶ 88.

For a loan that required manual underwriting, the lender must certify that the underwriter “personally reviewed the appraisal report (if applicable), credit application, and all associated documents and has used due diligence in underwriting the mortgage.” Id. For a loan approved through the use of an AUS, HUD requires the lender to certify to the “integrity of the data” it entered, id. ¶ 88, which, according to the complaint, “HUD defines as data that is true, complete, and accurate,” id. ¶64. (citing FHA TOTAL Mortgage Scorecard User Guide, ch. 2, (Dec. 2004 ed.) (Dkt. 16-6)).

As a DEL, Quicken was authorized by HUD to make loans in accordance with FHA’s underwriting guidelines and program requirements and submit those loans to FHA for insurance. Compl. ¶¶ 3, 38-39, 49-68. Many of Quicken’s mortgage loans were approved by HUD’s TOTAL algorithm. See, e.g., id. ¶¶ 125-126, 139-142, 149-150,173-174, 200.

In April 2012, the Department of Justice and the HÜD Office of Inspector General began investigating Quicken under the False Claims Act. Quicken Loans, 152 F.Supp.3d at 943. The scope of the investigation encompassed approximately 246,000 FHA loans that Quicken had originated from mid-2007 through December 31, 2011. Id. After the parties were unable to reach a settlement, Quicken filed suit against the Government in this district, id. at 944, which suit this Court ultimately dismissed, id. at 955.

The Government originally filed this action in the United States District Court for the District of Columbia less than one week after Quicken had filed its suit. Id. The Government’s case was eventually transferred to this district, see United States v. Quicken Loans Inc., 217 F.Supp.3d 272, 2016 WL 6838186 (D.D.C. Nov. 18, 2016); Quicken’s motion to dismiss followed.

II. STANDARD OF DECISION

In evaluating a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “[cjourts must construe the complaint in the light most favorable to plaintiff, accept all well-pled factual allegations as true, and determine whether the complaint states a plausible claim for relief.” Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010). To survive a motion to dismiss, a complaint must plead specific factual allegations, and not just legal conclusions, in support of each claim. Ashcroft v. Iqbal, 556 U.S. 662, 678-679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A complaint will be dismissed unless it states a “plausible claim for relief.” Id. at 679, 129 S.Ct. 1937.

III. ANALYSIS

The Court will first address Quicken’s arguments in its motion to dismiss concerning the claims under the False Claims Act before addressing its arguments concerning the federal common-law claims.

A, False Claims Act Claims

The Government asserts two claims under the False Claims Act—a “presentment” claim under - 31 U.S.C. § 3729(a)(1)(A) and 31 U.S.C. § 3729(a)(1) (2006), and a “false statement” claim under 31 U.S.C. § 3729(a)(1)(B). See, e.g., United States ex rel. Winkler v. BAE Sys., Inc., 957 F.Supp.2d 856, 864 (E.D. Mich. 2013) (using colloquial references of “presentment” and “false statement” to distinguish claims),’

To state á presentment claim under the Act, the Government must sufficiently plead that (i) Quicken presented, or caused to be presented, a claim for payment or approval; (ii) the claim was false or fraudulent; and (iii) Quicken’s acts were undertaken “knowingly,” meaning with actual knowledge of the information, or with deliberate ignorance or reckless disregard for the truth or falsity of the claim. United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 838 F.3d 750, 761 (6th Cir. 2016). To state a false-statenjent claim under the Act, the Government must sufficiently plead similar elements: (i) Quicken made a false statement or created a false record; (ii) Quicken did so “knowingly” (defined the same as in a presentment claim); (iii) Quicken submitted the claim for payment to the federal government; and (iv) the false statement or record was material to the Government’s decision to make the payment sought by Quicken’s claim. See United States ex rel. Sheldon v. Kettering Health Network, 816 F.3d 399, 408 (6th Cir. 2016) (citing United States ex rel. SNAPP, Inc. v. Ford Motor Co., 618 F.3d 505, 509 (6th Cir. 2010)); Prather, 838 F.3d at 780 (McKeague, J., concurring in part, dissenting in part) (same).

In its motion to dismiss, Quicken raises numerous arguments that it contends warrant dismissal of all of the claims under the False Claims Act. The Court considers each in turn.

1. Statute of Limitations

Although the statute of limitations is an affirmative defense, dismissal of an action is appropriate under Rule 12(b)(6) if the “allegations in the complaint affirmatively show that the claim is time-barred.” Stein v. Regions Morgan Keegan Select High Income Fund, Inc., 821 F.3d 780, 786 (6th Cir. 2016); Jones v. Bock, 649 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007) (“If allegations ... show that relief is barred by the applicable statute of limitations, the complaint is subject to dismissal for failure to state a claim[.]”). The False Claims Act bars the filing of a civil action “more than 6 years after the date on which the violation ... is committed,” or “more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances,” whichever occurs last. 31 U.S.C. § 3731(b); see also United States v. Movtady, 13 F.Supp.3d 325, 332 (S.D.N.Y. 2014) (“statute of limitations does not begin to run until HUD pays out on the insurance plan”).

The complaint alleges that Quicken’s fraudulent conduct occurred between September 1, 2007 and December 31, 2011. Compl. ¶ 1. Quicken argues that any False Claims Act causes of action regarding insurance claims on defaulted mortgages submitted more than six years before the filing of the complaint on April 23, 2015 are untimely. Def. Br. at 33. The Government appears to concede this point in its response brief, claiming that it is seeking “relief solely for mortgages on which claims were made within six years of the filing date of this action—i.e., after April 23, 2009.” PI. Br. at 33 (Dkt. 19) (emphasis added). Because the Government is only seeking recovery under the False Claims Act for claims made after April 23, 2009, which fall within the applicable limitations period for this case, the Court concludes that those claims are timely.

Accordingly, the Court grants this portion of Quicken’s motion to dismiss insofar as it relates to any claims submitted before April 23, 2009.

2. Pleading Scienter for Representative Examples of a Fraudulent Scheme

Under the liberal pleading standard of Federal Rule of Civil Procedure 8, a pleader is required to provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); see also Fed. R. Civ. P. 8(d)(1) (“Each allegation must be simple, concise, and direct.”). When a complaint alleges violations of the False Claims Act, however, the plaintiff must meet the heightened pleading standard for fraud under Federal Rule of Civil Procedure 9(b). Chesbrough v. VPA, P.C., 655 F.3d 461, 466 (6th Cir. 2011); Fed. R. Civ. P. 9(b) (“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.”). Pleading fraud with particularity under Rule 9(b) requires a plaintiff to allege: (i) the time, place, and content of the alleged misrepresentation; (ii) the fraudulent scheme; (iii) the defendant’s fraudulent intent; and (iv) the resulting injury. Chesbrough, 655 F.3d at 467.

When the allegations in a complaint regarding a fraudulent scheme are “complex,” “far-reaching,” and “encompass many allegedly false claims over a substantial period of time,” pleading every specific instance of fraud “would be extremely ungainly, if not impossible.” United States ex rel. Bledsoe v. Cmty. Health Systems, Inc., 501 F.3d 493, 509 (6th Cir. 2007). Under those circumstances, the plaintiff may allege a more generalized false or fraudulent scheme perpetrated by the defendant. Id. at 510. However, the court should not construe this scheme too broadly, as doing so would violate the heightened pleading standard underlying Rule 9(b). Id. Nor should the scheme be construed too narrowly, as doing so would undermine the principle that it could be impractical for a plaintiff to plead each and every instance of fraudulent conduct. Id. To properly strike a balance between these two competing interests, a court should construe a fraudulent scheme “as narrowly as is necessary to protect the policies promoted by Rule 9(b).” Id.

Importantly, pleading a fraudulent scheme with particularity alone is insufficient to proceed to discovery. Id. at 504 (rejecting plaintiffs contention that a complaint is adequate if it “pleads a false scheme with particularity” (emphasis in original)). Rather, the plaintiff must plead a specific example of a false claim with particularity that was “submitted to the government pursuant to that scheme.” Id. at 510; see also United States ex rel. Hirt v. Walgreen Co., 846 F.3d 879, 881 (6th Cir. 2017) (“The identification of at least one false claim with specificity is ‘an indispensable element of a complaint that alleges a [False Claims Act] violation in compliance with Rule 9(b).’” (quoting Bledsoe, 501 F.3d at 504)). These examples will support more generalized allegations of fraud if they are representative “of the broader class of claims.” Bledsoe, 501 F.3d at 510.

In other words, the examples of specific false claims must be “characteristic examples that are illustrative of the class of all claims covered by the fraudulent scheme.” Id. at 511. This means that the examples must be pled with specificity “in all material respects, including general time frame, substantive content, and relation to the allegedly fraudulent scheme,” such that “a materially similar set of claims could have been produced with a reasonable probability by a random draw from the total pool of all claims.” Id.

In. this case, the .Government alleges that Quicken created a fraudulent scheme of “knowingly representing to HUD certain FHA-insured mortgages had been underwritten with due diligence and were eligible for FHA insurance when, in fact, they were not.” PI. Br. at 4-5. According to the Government, the “allegations of falsity are narrowly based on rales related to the creditworthiness of the borrower and the sufficiency of the collateral securing the mortgages.” Id. at 5. The complaint then provides ten specific examples of false claims that were submitted to HUD, all ,of which fall within one of the following four practices Quicken used to cany out its scheme: (i) permitting “value appeals,” (ii) making, “management exceptions,” (iii) miscalculating borrower income, and (iv) manipulating , data and ignoring “red flags.” Quicken argues that the Government has failed to sufficiently plead scien-ter as to each of the examples found within the four practices identified in the complaint.

Although Rule 9(b) requires a plaintiff to plead the “circumstances constituting fraud” with particularity, allegations of “[mjalice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). To determine whether a plaintiffs factual allegations give rise to an inference of fraudulent intent, “the court must .conduct an inquiry of the competing plausible inferences and must find scienter has been sufficiently pled as long as a reasonable person would deem the inference of scien-ter cogent and at least as -compelling as any opposing inference one could draw from the facts alleged.” Chamberlain v. Reddy Ice Holdings, Inc., 757 F.Supp.2d 683, 701 (E.D. Mich. 2010); see also Robert N. Clemens Trust v. Morgan Stanley DW, Inc., 485 F.3d 840, 848 (6th Cir. 2007) (allegations of a defendant’s motive and opportunity “may, on occasion, rise to the level of creating a strong inference of reckless or knowing conduct”). “[W]hile Rule 9(b) permits scienter to be demonstrated by inference, this must not be mistaken for license to base claims of fraud on speculation and conelusory allegations. An ample factual basis must be supplied to support the charges.” United States ex rel. Pervez v. Beth Israel Med. Ctr., 736 F.Supp.2d 804, 810-811 (S.D.N.Y. 2010); United States v. Honeywell Int’l Inc., 798 F.Supp.2d 12, 22 (D.D.C. 2011) (“[T]he particular difficulties of proving scienter do not absolve plaintiffs of their duty to plead some facts from which the court may reasonably infer knowledge.” (emphasis in original)).

To satisfy scienter under of the False Claims Act, the Government must prove that Quicken “knowingly” presented, or caused to be presented, a false or fraudulent claim, or “knowingly” made, used, or caused to be made or used, a false record or statement. 31 U.S.C. §§ 3729(a)(1)(A)-(B). A defendant acts “knowingly” if it acted with “actual knowledge” of, or with “deliberate ignorance” or “reckless disregard” to, the possibility that the submitted claim was false. 31 U.S.C. §§ 3729(b)(l)(A)(i)-(iii).

While actual knowledge addresses a defendant’s subjective.knowledge, deliberate ignorance addresses whether there is willful blindness from which subjective intent can be inferred. United States ex rel. Hockett v. Columbia/HCA Healthcare Corp., 498 F.Supp.2d 25, 57 (D.D.C. 2007). Reckless disregard has been described as an “aggravated form of gross negligence.” Wall, 697 F.3d at 356; accord United States v. Krizek, 111 F.3d 934, 941 (D.C. Cir. 1997) (“[Rjeckless disregard lies on a continuum between gross negligence and intentional harm,”); cf. United States v. King-Vassel, 728 F.3d 707, 712 (7th Cir. 2013) (“innocent' mistakes or negligence are not actionable under’.’ the False Claims Act). Scienter under the False Claims Act “is necessarily a fact-intensive inquiry.” United States ex rel. K & R Ltd. P’ship v. Mass. Hous. Fin. Agency, 456 F.Supp.2d 46, 61 (D.D.C. 2006).

Having established the governing legal framework, the Court now turns to Quicken’s specific arguments for each of the practices, as well as the representative examples. Determining whether, the examples of false claims are sufficiently pled with particularity requires the Court to engage in a paragraph-by-paragraph analysis of the complaint. See Bledsoe, 501 F.3d at 509.

i. Value-Appeals Process

The complaint alleges that Quicken created a value-appeals process, which “permitted employees to request specific inflated values from appraisers in order to make a loan eligible for FHA insurance.” Compl. ¶ 111; see also id. ¶ 131 (in violation of FHA rules, “Quicken created a formal value appeal process that improperly requested from appraisers a specific and desired value”). The complaint further claims that this practice was “specifically prohibited by the governing FHA requirements, which forbade lenders from requesting specific valuations from appraisers.” Id. ¶ 111; see also id. ¶ 130 (“FHA rules specifically provide that an appraisal cannot be ‘based on a requested minimum valuation, a specific valuation or range of values’ ” (citing Mortgagee Letter 1996-26, Ex. 3 to Def. Mot. (Dkt. 16-3))); id. (“To preserve appraiser independence, FHA rules have continually prohibited a lender such as Quicken from requesting or providing to the appraiser ‘an anticipated, estimated, encouraged or desired value.”’ (citing Mortgagee Letter 2009-28, Ex. 4 to Def. Mot. (Dkt. 16-4))).

According to the complaint, the value-appeals process “led to appraisers increasing the appraised value of a property, often with no justification for the increase,” thereby allowing Quicken “to maximize its profit by approving more and larger FHA-insured loans than were otherwise approvable.” Id. ¶ 111; see also id. ¶ 128 (value-appeals process “resulted in employees demanding and receiving a higher home appraisal value with no documentation or justification for the increased value of the home or the FHA loan”). The Government provided four representative examples in the complaint (all of which involved mortgages that were closed in 2008) where Quicken allegedly requested value appeals in violation of FHA rules, falsely certified that the loan was eligible for FHA insurance, and caused a false claim to be submitted to HUD. See generally id. ¶¶ 139-142.

In its motion to dismiss, Quicken argues that the complaint fails to allege scienter as to these examples because value appeals were not unambiguously prohibited by HUD at the time the loans were made, and Quicken’s interpretation of the rules was not objectively unreasonable. See general-⅛ Def. Br. at 13-15. In support of this argument, Quicken first claims that FHA Mortgagee Letter 1996-26, which required an appraiser to certify that the appraisal was not “based on” a requested value, did not apply to lenders. Def. Br. at 14. Quicken further claims that FHA Mortgagee Letter 2009-28—which, according to Quicken, “allegedly prohibited value appeals effective as of 2010”—cannot be used to satisfy scienter because Quicken ceased requesting value appeals in 2009. Id. (citing Compl. ¶ 143). Quicken also claims that FHA guidelines allowed underwriters to “request reconsideration” of an appraiser’s value opinion. IcL at 14-15.

The Government responds that the complaint “details that the standards set forth in the Mortgagee Letters are not only requirements of the appraiser, but also requirements of the lender.” PI. Br. at 13 (citing Compl. ¶¶ 56-58). The Government further contends that the emails referred to in the complaint sufficiently allege that Quicken knew the value-appeals process was in violation of FHA requirements. Id at 11-12 (citing Compl. ¶¶ 135-136). The Court agrees with the Government.

Viewing the allegations in the light most favorable to the Government, the complaint sufficiently alleges that FHA requirements prohibited Quicken from requesting or providing to an appraiser a specific or desired value at the time the example mortgages were closed in 2008. See Compl. ¶ 56 (“The appraisal must include the appraiser’s certification that, among other things, the appraisal was not based on a requested minimum value or a specific value.” (citing HUD Handbook 4150.2, CHG-1, ch. 5-l.A)); id (“The Direct Endorsement Lender ‘must accept responsibility, equally with the appraiser, for the integrity, accuracy, and thoroughness of the appraisal, and will be held accountable by HUD for the quality of the appraisal.’ ” (quoting Mortgagee Letter 1994-54)); id. ¶ 58 (“FHA rules specifically provide that an appraisal cannot be ‘based on a requested minimum valuation, a specific valuation or range of values.’” (quoting Mortgagee Letter 1996-26)); id. (“Appraiser independence from lenders has been a significant concern of the FHA, and as HUD reaffirmed in 2009, lenders are prohibited from providing the appraiser ‘an anticipated, estimated, encouraged or desired value.’” (quoting Mortgagee Letter 2009-28)).

Of the three mortgagee letters referenced in these allegations of the complaint, only two were attached as exhibits in the briefing. First, Mortgagee Letter 1996-26 set forth certain minimum appraisal standards, one of which was that a statement be included “in the certification required by [the Uniform Standards of Professional Appraisal Practice] ... that the appraisal is not based on a requested minimum valuation, a specific valuation or range of values, or the approval of a loan.” Mortgagee Letter 1996-26 at 2. Although the appraiser was the individual required to make the statement in the certification, this letter was sent to “all approved mortgagees.” Id. at 1. Thus, those mortgagees who received the letter were clearly aware, and sufficiently warned, that an appraisal could not be based on a requested or specific valuation.

Furthermore, the Mortgagee Letter 2009-28 not only provides that “new requirements set forth in this mortgagee letter will be effective for all case numbers assigned on or after January 1, 2010,” but that “existing requirements will remain in effect.” Mortgagee Letter 2009-28 at 1 (emphasis added). In the portion entitled “Affirming Existing Requirements,” the letter expressly states:

FHA is reaffirming these requirements. Mortgagees and third parties working on behalf of mortgagees are prohibited from:

Providing to the appraiser an anticipated, estimated, encouraged or desired value for a subject property or a proposed or target amount to be loaned to the borrower, except that a copy of the sales contract for purchase must be provided.

Id. at 3 (emphasis added). This language clearly contradicts Quicken’s contention that this letter prohibited value appeals for the first time in 2009 with an effective date of 2010.

The allegations in the complaint, when viewed in the light most favorable to the Government, also allow for the reasonable inference that Quicken knew its value-appeals process was in violation of FHA requirements. See Compl. ¶ 134 (email from Darren Thomas, operations director responsible for appraisals, entitled “Asking for the max increase available,” allegedly instructed employees to state in request to appraisers that “any additional value would be appreciated”); id. ¶ 135 (email from Clint Bonkowski, the divisional vice pi’esident for underwriting, in which he allegedly wrote, “I don’t think the media or any other mortgage company (FNMA, FHA, FMLC) would like the fact we have a team who is responsible to push back on appraisers”); id. ¶ 136 (email from Thomas rejecting the request of David Lee, a regional vice president, .for a second value opinion, in which Thomas allegedly wrote, “we cannot order a 2nd opinion appraisal as FHA will already be aware of this appraisal, We already have a couple of loans that are not insurable because of this situation,’’.where a requested value appeal was initially denied by the appraiser, and the appraiser responded that .“it appears someone is attempting to force an inflated value”).

Finally, Quicken’s reliance on Safeco Insurance Company of America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), to support the argument that .its interpretation of FHA requirements was not objectively unreasonable is unavailing. Safeco involved a consumers class-action suit against insurance companies for alleged violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. See generally Safeco, 551 U.S. at 52-56, 127 S.Ct. 2201. FCRA imposes liability on anyone who “willfully fails” to provide notice to the consumer' of an “adverse action based in whole or in part on any information contained in a consumer credit report.” Id. at 52, 127 S.Ct. 2201. The plaintiffs in Safeco accused the insurance companies of failing to provide adverse-action notices to consumers after the company reviewed credit reports and provided less favorable rates to the consumers based upon the reports. Id. at 55-56, 127 S.Ct. 2201, The companies argued- that they did not “willfully” fail to comply with FCRA because, under their interpretation of the relevant statute, liability goes only to acts known to violate FCRA. Id. at 56-57, 127 S.Ct. 2201.

After holding that the term “willfully” encompassed recklessness, the Supreme Court considered whether it could infer from Safeco’s interpretation of the statute that Safeco acted recklessly. Id. at 57, 69, 127 S.Ct. 2201. According to the Court, “a company subject to FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute’s' terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” Id. at 69, 127 S.Ct. 2201. The Court further noted that Safeco did not have any statutory, regulatory,'or judicial guidance “that might have warned it away from the view it took.” Id. at 70, 127 S.Ct. 2201. The Court'ultimately concluded that, “[gjiven this dearth of guidance and the less-than-pellucid statutory text, Safeco’s reading was not objectively unreasonable, and so falls’well short of raising the ‘unjustifiably high risk’ of violating the statute necessary for reckless liability.” Id.

Safeco offers Quicken no solace. It involved a statute whose language was ambiguous—giving rise to the test whether .the defendant’s reading of the statute was objectively unreasonable; here, no ambiguity with the False Claims Act is alleged, making the Safeco test irrelevant.

Even if the Safeco test were applicable, the complaint plausibly alleges that Quicken’s interpretation of its obligations concerning value appeals was objectively unreasonable. ■ The- complaint alleges that Quicken-was equally responsible for an appraisal, Compl. ¶ 56 (citing Mortgagee Letter 1994-54), and, unlike the defendant in Safeco, who had no legal “guidance” from governmental authorities, Safeco, 551 U.S. at 70, 127 S.Ct. 2201, Quicken had fair warning that-an appraisal could not be based on a requested or specific valuation, Compl. ¶ 56. (citing HUD. Handbook 4150.2, CHG-1, ch. 5-1.A); see also id. ¶ 58 (citing Mortgagee Letter 1996-26). Although FHA guidelines allow underwriters to request “reconsideration” of an appraiser’s value opinion, see HUD Handbook 4000.4, REV-1, ch. 3-3.G, Ex. 5 to Def. Mot., at 2 (em/ecf page) (Dkt. 16-5) (“If the underwriter concludes that the appraisal report findings are inconsistent, or otherwise unacceptable, he may contact the appraiser or return the case to the appraiser for reconsideration”), it does not follow-that Quicken was objectively reasonable to interpret reconsideration as permitting a request for a specific and desired value from an appraiser through its value-appeals process. Quicken’s position is objectively, unreasonable, because it would provide an easy evasion of the prohibition of asking for specific amounts through the expedient technique of asking for reconsideration in any instance. In fact, the only plausible harmonization of the prohibition of asking for specific amounts and the allowance for seeking reconsideration can be found in confining the latter to the grounds that may be urged—such as the traditional arguments concerning new, overlooked, or misapplied information— but without seeking a specific dollar amount. In light of the clear proscription of requesting an exact appraisal amount, Quicken’s unreasonable interpretation ran an unjustifiably high risk of violating FHA requirements, which plausibly satisfies the reckless disregard standard under the Safeco test.

Because the Government has sufficiently alleged scienter relative to the value-appeals process examples, the Court denies this portion of Quicken’s motion to dismiss.

ii. Management-Exception Process

The' complaint alleges that Quicken created a management-exception process that allowed its underwriters “to request management approval for an exception to underwriting requirements that could not be met.” Compl, ¶ 115. The 'Government provided two representative examples in the complaint where Quicken granted management exceptions that allegedly violated FHA underwriting requirements.

In the first case, the Government alleges that Quicken failed to obtain a self-employed borrower’s signed tax returns or information directly from the IRS for the two most recent years, as required under condition 22 of the AUS certificate. Id. ¶ 125(c). Rather, the Government claims that a Quicken employee granted an exception to HUD’s income verification requirements and permitted the loan to proceed. Id. ¶ 125(d). Because of this, the Government alleges that “Quicken knowingly qualified the borrower based on income documentation that was more than twenty months old at the time the mortgage was endorsed.” Id. Quicken approved and endorsed the loan for FHA insurance and certified that it complied with HUD requirements and was eligible for insurance. Id. ¶ 125(a). A claim for insurance was filed after the borrower became delinquent, which HUD paid in the amount of $487,010.33. Id. ¶ 125(e);

•In the second case, the Government alleges that Quicken failed to properly document and verify the income of a co-borrower that it input into the AUS system. 'Id. ¶ 126(c). According’to the complaint, condition 22 of the AUS certificate requires the lender to obtain the most recent year-to-date pay stub for the co-borrower, as well as a verification of employment, and condition 10 of the AUS certificate requires that all verification documents must be dated within 120 days of the closing date of the loan. Id. Rather than obtain the documentation, Mike Lyon, Quicken’s operations director, granted an exception to HUD’s income verification requirements and permitted the loan to proceed without obtaining a paystub for the co-borrower that complied with HUD’s documentation requirements. Id. ¶ 126(d). Thus, according to the complaint, Quicken “knowingly used a stale paystub that was more than four months old at the time the loan closed, in clear violation of HUD requirements.” Id. Nevertheless, Quicken approved and endorsed the loan for FHA insurance and certified that it complied with HUD requirements and was eligible for insurance. Id. ¶ 126(a). A claim for insurance was filed after the borrower became delinquent, which HUD paid in the amount of $238,295.32. Id. ¶ 126(e).

Regarding the first example, Quicken argues that the complaint fails to plead scienter for two reasons: (i) the availability of a 2007 tax return at the time the loan was closed in October 2008 is speculative, and (ii) the complaint does not allege that the employee knew that the 2007 tax return was available or acted recklessly as to whether it was available. Def. Br. at 20-21.

Regarding the second example, Quicken argues that the complaint fails to plead scienter because it does not allege that either the underwriter or the manager had knowledge that the document was more than 120 days old when the loan was certified. Id. at 21. According to Quicken, the allegation that it “knowingly used a stale paystub” is too conclusory to plausibly suggest a knowingly false certification, because it presumes that Quicken calculated the timing of the paystub, recognized it was too old, but used it anyway. Id.

The Court disagrees. The complaint clearly alleges that Quicken created a management-exception process, whereby underwriters could “request management approval for an exception to an FHA underwriting requirement that could not be met in order to approve loans.” Compl. ¶ 110; see also id. ¶ 115. “As part of this process, Quicken granted management exceptions to allow violations of FHA underwriting requirements.” Id. ¶ 115. The complaint also includes allegations that Quicken had knowledge of this management-exception process. Id. ¶ 118 (Bon-kowski testified “that an underwriter’s decision whether to seek a documented management exception or to provide the exception on his own ‘depends on what that ... underwriter [is] comfortable with.’ ”); id. ¶ 120 (for loan granted a management exception, Jeanine Taylor, operations director of the FHA team, allegedly wrote in an email that the borrower “does not have the FHA required docs but we are going to go with it”); M. ¶ 121 (after receiving “absolute confirmation” from Bobbi MacPherson, FHA product manager, that a loan would be “uninsura-ble,” Lyon granted a management exception, and allegedly wrote in an email, “whenever we bump into utterly stupid underwriting guidelines like this, we have to push back hard ... I’ll put the exception in on this one”).

Furthermore, the two examples in the complaint illustrate underwriters requesting, and receiving, management exceptions for their respective loans. Id. ¶¶ 125(d), 126(d). Given the allegations about the purpose of the management-exception process, it logically follows that an underwriter would not have sought a management exception unless the loan did not satisfy FHA underwriting requirements in the first place. Why else would the management exception be sought? Similarly, a manager’s grant of the underwriter’s request would not come about unless the loan did not originally satisfy FHA underwriting requirements.

Quicken’s demand that the complaint include factual allegations that the first underwriter knew that the 2007 tax return was available, or that the other underwriter consciously knew that the paystub was more than 120 days old, see Def. Br. at 20-21, does not reflect any recognized pleading requirement. The complaint need not include allegations as to whether those underwriters had specific knowledge of the particular errors. Rather, the Government need only plead sufficient factual allegations from which the underwriters’ scien-ter can be reasonably inferred.

For the first example, the complaint alleges that the approval of the loan required Quicken to obtain signed tax returns from 2006 and 2007. Compl. ¶ 125(c). However, because the loan was granted a management exception to HUD’s income verification requirements, the loan was improperly qualified based on the income documentation that was more than 20 months old at the time of the mortgage was endorsed. Id. ¶ 125(d). Thus, by requesting and receiving a management exception for the income verification requirement, it can be reasonably inferred that the underwriter either had knowledge of the 2007 tax return or acted recklessly as to whether it was available.

For the second example, the complaint alleges that the approval of the loan required Quicken to obtain the most recent year-to-date pay stub for the co-borrower and that all verification documents be dated within 120 days of the loan’s closing date. Id. ¶ 126(c). However, because the loan was granted a management exception to HUD’s income verification requirements, the loan was improperly qualified based on a paystub that was more than four months old at the time the loan closed. Id. ¶ 126(d). By requesting and receiving a management exception for the income verification requirement, it can be reasonably inferred that the underwriter either had knowledge of the paystub’s date or acted recklessly as to its date. Nor is the complaint’s assertion that “Quicken knowingly used a stale paystub” eoncluso-ry, as Quicken suggests, because it is a reasonable inference that is supported by other factual allegations.

The Court concludes that the allegations in the complaint allow for the reasonable inference that the underwriters had either the actual knowledge that the particular loan did not satisfy FHA requirements or, at a minimum, recklessly disregarded that fact; the Government has sufficiently alleged scienter for the management-exception process examples, thereby asserting plausible violations of the False Claims Act.

The Court denies this portion of Quicken’s motion to dismiss.

iii. Miscalculation of Income

According to the complaint, “an underwriter must evaluate the ‘adequacy and stability of income to meet the periodic payments under the mortgage and all other obligations.’ ” Compl. ¶ 144 (quoting 24 C.F.R. § 203.5(d)). To adequately evaluate a borrower’s income, “the underwriter must be able to accurately calculate and document the income according to FHA requirements.” Id. The Government provided two representative examples in the complaint where Quicken allegedly miscalculated a borrower’s income but certified that the loans were eligible for FHA insurance.

In the first example, the Government alleges that Quicken “overstated the income used to qualify the borrower[] for the loan” because “Quicken used a monthly income of $3,293.33,” but “the documentation of the borrower’s income for the previous two years ... only supported a monthly income of no more than $2,700.” Compl, ¶ 149(c). The Government claims that Quicken approved and endorsed the loan for FHA insurance based on the overstated monthly income. Id. ¶¶ 149(a), (c). Quicken also “certified that the information and data used to underwrite the loan had integrity and were properly verified, that all of the AUS .conditions had been satisfied, and that the loan complied with all HUD requirements and was eligible for FHA insurance.” Id. ¶ 149(a). A claim for insurance was filed after the borrower became delinquent, which HUD paid in the amount of $182,747.35. Id. ¶ 149(d).

In the second example, the Government alleges that Quicken first failed to properly document a co-borrower’s pension income because Quicken “used a pension income of $9,381.33 to qualify the [co-]borrower for an FHA-insured mortgage" but “failed to verify and document the continuance of the co-borrower’s pension income for three years.” Id. ¶ 150(c). According to the complaint, condition 22 of the AUS certificate required such verification because, “if any benefit will expire within three years, the income may be used only as a compensating factor.” Id. The Government also alleg: es that Quicken “did not determine or document the non-occupying co-borrowers’ monthly condominium fees, and such fees were not taken into consideration when calculating the debt-to-income ratio.” Id. ¶ 150(d). Further, the Government alleges that Quicken did not include in the AUS calculation of monthly liabilities the- co-borrower’s “monthly payment of $2,042 to Bank of America,” which was revealed in a credit report. Id. ¶ 150(e), Nevertheless, Quicken approved and endorsed the loan for FHA insurance, as well as certified the loan’s compliance with HUD requirements and its eligibility for insurance. - Id. ¶ 150(a). A claim for insurance was filed after the borrowers became delinquent, which HUD paid in the amount of $98,243.25. Id. ¶ 150(f).

In its motion to dismiss; Quicken argues that the complaint fails to allege that any errors in the two representative examples of miscalculated income were knowingly made, as opposed to being “inadvertent” or a “mistake,” Def. Br. at 18-19. For instance, Quicken contends that the complaint does not allege that the underwriter for the first example knowingly or recklessly used the wrong amount. Id. at 18. For the second example, Quicken contends that the complaint does not allege that the underwriter knew of, or acted recklessly to cause, the supposed mistake regarding pension income. Id. , at 18-19.

While the 'complaint does not contain any express factual allegations that the particular underwriters either knew of or recklessly disregarded the income errors, a court may look to whether there are facts alleged from which inferences may be drawn regarding intent. See Honeywell, 798 F.Supp.2d at 22; Pervez, 736 F.Supp.2d at 810-811.

The first example in the complaint identified only a single income discrepancy. Without more, this error can hardly be said to amount to a plausible claim under the False Claims Act distinguishable from an innocent mistake or simple negligence. King-Vassel, 728 F.3d at 712. However, the second example, contained numerous blatant errors that “even the shoddiest recordkeeping would have revealed” as income miscalculations. Krizek, 111 F.3d at 942 (reckless disregard was amply supported where the physician “failed utterly to review bills submitted, on his behalf’ to Medicare for excessive number of patient-care hours, including billing for treatment that “approached twenty-four hours in a single day”).

Nor can the various errors regarding income miscalculations in the second example—e.g., failure to verify and document the co-borrower’s pension, income for three years, failure to determine or document the non-occupying co-borrowers’ monthly condominium fees, and failure to include the non-occupying co-borrowers’ monthly payment to a bank—be characterized as instances of “bad math” or “flawed reasoning” that fall outside the scope of False Claims Act liability. United States ex rel. Roby v. Boeing Co., 100 F.Supp.2d 619, 625-626 (S.D. Ohio 2000). Rather, these glaring errors and omissions, at the very least, allow for the reasonable inference that the underwriter acted with reckless disregard in calculating the co-borrowers’ income for the mortgage loan, which supports a plausible claim under the False Claims Act.

. Compounding Quicken’s reckless disregard in this case are the complaint’s allegations that Quicken management “was aware that inaccurate calculation and documentation of borrower’s income was a problem that consistently plagued the company,” but Quicken failed to correct it. Id. ¶ 151. For instance, in 2008, only 44 percent of Quicken’s underwriters passed a test meant “to evaluate their proficiency in calculating and documenting a borrower’s income,” which led Mike Lyon, operations director, to allegedly write in an email that some underwriters “need to go = back to school.” Id. ¶ 152. In 2009, Bill- Emerson, the CEO of Quicken, allegedly sent an email to the “Credit and Risk Management Group,” in which he wrote, “calculating income is our biggest buy back issue,” and asked what could be done to “make sure we don’t screw up income.” Id. ¶ 153, And, in 2010, Quicken’s “Credit Strategies Group” allegedly recognized Quicken’s “recurring income calculation challenges.” Id. The complaint alleges, that, -despite recognizing the recurring problem of income miscalculation from 2008 to 2010, Quicken failed to correct this problem. See id. ¶ 154.

Further, Bill Banfield, director of capital markets, allegedly sent an email- to other senior managers in 2011 that, according to the complaint, identified “income problems as ‘pervasive in any one of the forums where we review for errors,’ and asking whether training was necessary.” Id. ¶ 155. Responding in an email, Clint Bonkowski, divisional vice president for underwriting, wrote, “do wé have issues with income yes, do 50% of our UW’s have less than 12 months experience yes, do we need to do some training, absolutely,” but concluded that it would be a “waste of [underwriters’] time and loss of production just to say we trained them.” Id. The complaint then states that “Bonkowski testified that he could not remember or identify any income training that took place after he sent the 2011 email.” Id

The Government argues that these allegations “demonstrate that Quicken’s management was fully aware of its pervasive miscalculation ... of income, and chose not to fix the problem.” Pl. Br. at 18. This focus on management actions and intent is relevant on the question of recklessness. Wells Fargo, 972 F.Supp.2d at 620 n.18 (citing Bledsoe, 501 F.3d at 506) (because the Government alleged violations of the False Claims Act against the bank, not the individual employees who signed the false mortgage loan origination certification, the bank’s intent must be sufficiently pled, not the employees’ intent). The Court agrees that the Government has set forth sufficient allegations that Quicken’s management knew of a pervasive problem with inaccurate income calculation and was reckless in failing to take appropriate action to correct it.

Because the Court concludes that the Government has sufficiently alleged scien-ter for the second income-miscalculation example and asserted a plausible violation of the False Claims Act, the Court denies Quicken’s motion as to income miscalculation.

iv. Manipulating Data and Ignoring “Red Flags”

Regarding data manipulation, the complaint alleges that Quicken’s underwriters manipulated “data entered into the AUS in order to gain a TOTAL Accept/Approve decision.” Compl. at ¶ 166. According to the complaint, Quicken employees would circumvent the TOTAL system by entering “hypothetical data in order to determine the minimum amount of a given variable—for example, borrower assets or income—that TOTAL required in order to obtain an Accept/Approve decision.” Id. ¶ 167.

The complaint further alleges that Quicken employees would manipulate “the way in which they verified data to obtain data that would be skewed.” Id. For instance, the complaint alleges that “Quicken would verify data points at a time when it was most favorable to obtaining an accept decision,” such as “obtaining a bank statement at a time when the borrower had an inflated balance.” Id. ¶ 168. By doing so, “Quicken employees knew the balances were not a full and complete representation of the borrower’s financial situation” because “the account balance would be in excess of the average account balance.” Id.

The Government provided one representative example in the complaint where Quicken allegedly manipulated data. See id. ¶ 173. In that example, a Quicken employee allegedly manipulated the AUS in order to obtain an Accept/Approve decision by entering hypothetical data into the AUS to determine the amount of assets the borrower would need to obtain the accept decision. Id. ¶ 173(d). Recognizing that the borrower did not have this amount of assets, the complaint states that the employee waited to verify the assets when the borrower’s account was maximized— i.e., on the day the borrower received her paycheck. Id.

Quicken argues that the complaint failed to allege scienter for this example because Mortgage Letter 2005-15 did not unambiguously prohibit this type of data manipulation. Def. Br. at 18 (citing Compl. ¶ 67). According to Quicken, that letter addressed data manipulation in the narrow situation where there was a “‘difference between data entered into TOTAL and verified by the lender’ as to three specific inputs,” none of which was an input at issue the Government’s example. See id. (quoting Mortgagee Letter 2006-15, Ex. 7 to Def. Mot. (Dkt. 16-7)). Quicken further argues that scienter has not been sufficiently pled because the complaint does not allege that the data Quicken entered into the system was incorrect. Id.

The Government responds that the complaint pled, in detail, the requirements of TOTAL that Quicken violated, PI. Br. at 16 (citing Compl. ¶¶ 62-68), identifies the particular manner in which Quicken committed these violations, id. at 16-17 (citing Compl. ¶¶ 166-171), and provides examples of these violations, id. at 17 (citing Compl. ¶¶ 173-174).

The following are the relevant allegations in the complaint that the Government claims set forth the FHA requirements that Quicken violated:

• “When TOTAL approves the loan, the approval is conditioned on the lender completing certain additional underwriting steps. Many of these conditions relate to ensuring the data the lender entered is true, complete, and accurate.” Compl. ¶ 62;

• “HUD requires the lender to certify to the integrity of the data it entered, which HUD defines as data that is true, complete, and accurate.... If the lender later receives information or learns of information that materially differs from the information previously entered by the lender, the lender must re-submit a proposed loan to TOTAL through the AUS.” Id. ¶ 64;

• It is the lender’s “responsibility to ensure the integrity of the data relied upon by TOTAL” because such data “is material to the endorsement of the loan because TOTAL is an algorithm that evaluates the overall creditworthiness of a mortgage application based on the data supplied by the lender.” Id. ¶ 65; and,

• “To ensure the integrity of TOTAL’S decision, as well as the integrity of the data TOTAL relies upon, lenders are prohibited from ‘manipulating ... application variables [in] TOTAL mortgage scorecard to obtain an accept/approve risk classification.’ ” Id. ¶ 67 (quoting Mortgagee Letter 2005-15).

Insofar as it relates to the prohibition of data manipulation, paragraph 67 of the complaint appears to be the most relevant, and, thus, consideration of Mortgagee Letter 2005-15 is required.

Mortgagee Letter 2005-15 begins by noting that “minor changes to certain application variables, e.g., cash reserves after closing, income, and the total mortgage payment used to render the risk classification from TOTAL do not warrant the need for rescoring the mortgage.” Mortgagee Letter 2005-15 at 1. Thus, the letter indicates that FHA would be “providing a degree of tolerance before triggering the requirement that a mortgage be rescored” as to three variables—cash reserves, income, and tax and insurance escrows. Id The letter emphasizes that “these tolerance thresholds are provided for those situations where loan application data differ from what the mortgage lender entered into TOTAL early in the loan processing phase and then documents later on.” Id. at 2. The letter then states that these tolerances “are not to result in willfully manipulating these application variables into the TOTAL mortgage scorecard to obtain an accept/approve risk classification.” Id. (emphasis added).

For Quicken to have knowingly violated the FHA’s requirement prohibiting data manipulation based on this letter, the example loan would have to involve the manipulation of one of the three specified variables—income, cash reserves after closing, or tax and insurance-escrows—for purposes of obtaining an Accept/Approve TOTAL decision. However, there are no allegations in the complaint that any of these specified variables were manipulated, that a borrower’s assets in a bank account falls within one of these variables, or that the variables also include assets. Nor are there any allegations to suggest that it would violate any FHA requirement for an underwriter to wait until, a borrower received a paycheck to enter the assets into the AUS, or that a requirement exists that requires an underwriter to enter some average amount, when it comes to assets.

Moreover, HUD requires a lender to certify to the “integrity of the data” that it entered into the AUS. Compl. ¶ 64. Although neither party sought to define the phrase “integrity of the data” in their briefs, the complaint posits that HUD defines “integrity of the data” as “data that is true, complete, and accurate.” Id. The complaint does not contain any allegations that, at the time the underwriter entered the borrower’s assets data for the example loan, the data were somehow untrue, incomplete, or inaccurate. Because the complaint did not sufficiently allege scienter for this example of data manipulation, the Court concludes that it does not plausibly state a claim under the False Claims Act,

In addition to data manipulation, the complaint alleges that Quicken’s underwriters ignored “obvious red flags that indicated a borrower would not be able to repay the mortgage.” Compl. ¶ 166; see also id. ¶ 169 (“Once a TOTAL Approve/Accept decision was obtained, Quicken would often fail to analyze risk factors and red flags indicating the borrower would be unable to make the mortgage payments associated with their FHA insured mortgage.”).

Quicken argues that the complaint fails to cite any regulation “that lenders were required to perform additional creditworthiness evaluations on loans that had been approved by the TOTAL system.” Def. Br. at 16-17. Quicken further contends that, if a loan is approved by TOTAL, the FHA rules provide that the underwriter has no duty to review the borrower’s-.creditworthiness. Id. at 17 (citing 24 C.F.R. § 203.255(b)(5); FHA TOTAL Mortgage Scorecard User Guide (Dec. 29, 2011), Ex. 6 to Def. Mot., at 4 (Dkt. 16-6)). Because the rules did not unambiguously require a lender to identify or analyze “red flags” if the loan was approved by TOTAL, Quicken claims that the complaint has failed to sufficiently allege scienter. Id.

In its response brief, the Government does not allege or provide any specific FHA rule, regulation, or requirement regarding “red flags,” but it cites the HUD rule mandating that lenders exercise “due diligence.” See PL Br. at 16 (citing Final Rule, Mutual Insurance Programs Under the National Housing Act; Direct Endorsement Processing,-48 Fed. Reg. 11928, 11932 (Mar. 22, 1983)). This general obligation to exercise due diligence was alleged in the complaint. See Compl. ¶50 (alleging “due diligence is a critical component” of the DEL program and is “required by federal regulation and HUD Handbooks”).

Beyond this general duty, there are specific FHA requirements that the Government argues Quicken violated when Quicken allegedly ignored red flags in the two examples set forth by the Government under that theory. To understand the Government’s red flag theory for the examples, those requirements must first be analyzed.

As explained above, beginning in July 2008, HUD required DEL lenders “to electronically process eligible loan requests through an AUS.” Id. ¶62. For a loan approved through the use of an AUS, the lender is required “to certify to the integrity of the data it entered, which HUD defines as data that is true, complete, and accurate.” Id. ¶ 64 (citing FHA TOTAL Mortgage Scorecard User Guide, ch. 2, (Dec. 2004 ed.)). The Government claims that this certification is material because “TOTAL is an algorithm that evaluates the overall creditworthiness of a mortgage applicant based on the data supplied by the lender,” and the loan receiving an Approve/Accept TOTAL decision “is only eligible for FHA’s insurance endorsement if ‘the data entered into the AUS are true, complete, properly documented, and accurate.’” Id. ¶65 (quoting FHA TOTAL Mortgage Scorecard User Guide, ch. 2 (Dec. 2004 ed.)). The complaint further notes that, “[b]ecause TOTAL cannot analyze data that is not available to it, certain loans are not eligible for an AUS approval and must be manually underwritten.” Id. ¶ 66. A manual downgrade becomes necessary if “additional information, not considered in the AUS decision, affects the overall insurability or eligibility of a mortgage otherwise rated as an accept or approve.” W, ¶ 66 (quoting FHA TOTAL Mortgage Scorecard User Guide, ch. 2 (Dec. 2004 ed.)).

The two examples in the complaint regarding red flags were underwritten using an AUS. See Compl.. ¶¶ 173(a), 174(a). Thus, Quicken’s certification as to those examples related to the integrity of the data. Id. ¶¶ 64,88, 200.

The first example involved a borrower who was renting the subject property at the time the mortgage loan closed. Id. ¶ 173(e). According to the complaint, “[t]ransactions that are sales from a landlord to a tenant are limited to 85% loan-to-value unless there is written evidence that the borrower has been renting the property from the landlord for the six months immediately predating the sale.” Id. (citing HUD Handbook 4155.1, REV-5, Ch. 1-8.A). Although the loan for this example had a 95.40% loan-to-value ratio, there'was “no written documentation that the borrower had been renting the subject property for at least six months.” Id. The complaint alleges that Quicken “did not ensure that the information it entered" into the AUS to obtain approval had integrity,” id. ¶ 173(b), because the borrower was ineligible for the loan absent the written documentation, see id. ¶ 173(e). Quicken’s certification that the data entered into TOTAL had integrity despite having incomplete information plausibly states a claim under the False Claims Act.

For the second example, the complaint alleges that Quicken “allowed the AUS to rely on inaccurate and incomplete data,” because the AUS system did not consider the borrower’s monthly payment for a secondary mortgage “when calculating the borrower’s debt to income ratio and it was not listed on the final Uniform Residential Loan Application.” Compl. ¶ 174(e), According to the Government, condition 22 on the AUS certificate required Quicken to “verify , the monthly payment amount when a debt or obligation was revealed that was not liste