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U.S. Government Files Civil Suit Against Wells Fargo
Seeks Damages for Alleged Mortgage Fraud
The U.S. Attorney on Tuesday filed a civil mortgage lawsuit against Wells Fargo & Co. seeking damages and civil penalties for more than 10 years of alleged misconduct related to government-insured housing loans.
In just the latest action charging big banks with mortgage fraud, Manhattan U.S. Attorney Preet Bharara argues that the Federal Housing Administration paid hundreds of millions of dollars on insurance claims on thousands of defaulted mortgages as a result of false certifications by the bank, Reuters reported Tuesday afternoon.
"As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," Bharara said.
Benn Hallman, reporting for The Huffington Post, said the U.S. alleges that between Jan. 1, 2002, and Dec. 31, 2010, Wells Fargo lied about the quality of the loans it certified for a federal insurance program, ultimately costing the government $190 million in claims when those loans failed.
According to Huffington, Wells Fargo is one of hundreds of banks permitted to certify mortgages for government backing by the FHA. The FHA, a division of the U.S. Department of Housing and Urban Development, will reimburse whoever holds the loans for the charges they incurred if the loans fail.
Wells Fargo denied the allegations, according to Reuters, and said it believes it acted in good faith and in compliance with the FHA and U.S. Department of Housing and Urban Development rules.
Bharara's office has brought previous such cases, and settled several including one against CitiMortgage Inc for $158.3 million, one against Deutsche Bank for $202.3 million, and one against Bank of America Corp.'s Countrywide unit for $1 billion, according to Reuters.