U.S. Sues Wells Fargo

Wells Fargo is the latest collateral damage from the housing boom. U.S. prosecutors are suing the bank -- the country’s largest originator of home loans -- for defrauding the government, accusing it of issuing mortgages without proper

wells

Wells Fargo is the latest collateral damage from the housing boom. U.S. prosecutors are suing the bank -- the country’s largest originator of home loans -- for defrauding the government, accusing it of issuing mortgages without proper discern and then lying about their condition to the Federal Housing Administration. When these problematic loans later defaulted, the Federal Housing Administration was obligated to cover the hundreds of millions of dollars in losses. The lawsuit attempts to reclaim those damages. “The bank will present facts to vigorously defend itself against this action,” a Wells Fargo rep said in a statement.

NYT:

In a lawsuit filed in Federal District Court in Manhattan, the prosecutors accused Wells Fargo, the country’s largest originator of home loans, of defrauding the government for more than a decade. The bank recklessly issued mortgages and then made false certifications about their condition to the Federal Housing Administration, a government agency that insured them, the complaint said.

The problematic loans were not eligible for the government insurance, according to the lawsuit, and when they soured, the F.H.A. was obligated to cover the losses. The Justice Department is seeking hundreds of millions of dollars in damages.

“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,” Preet S. Bharara, the United States attorney in Manhattan, whose office filed the lawsuit, said in a statement.

According the the government's complaint, Wells Fargo knew about the vast number of deficient loans but concealed them from the F.H.A.

About Diane Sweet

Diane Sweet's picture
Senior Editor, Lives in a gerrymandered district in Michigan.

Comments

We welcome relevant, respectful comments. Please refer to our Terms of Service for information on our posting policy.