kunc-header-1440x90.png
Our Story Happens Here
Play Live Radio
Next Up:
0:00
0:00
Available On Air Stations
NPR News

U.S. Government Sues Wells Fargo In Mortgage Case

Wells Fargo.
Wells Fargo.

The U.S. government filed a lawsuit against Wells Fargo & Co., today, saying the bank was reckless when it issued federally guaranteed mortgages.

Bloomberg reports:

"The government seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 for alleged misconduct spanning more than a decade related to the San Francisco-based bank's participation in a Federal Housing Administration program, U.S. Attorney Preet Bharara in Manhattan said in a statement.

"'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 in the statement.

"The FHA has paid hundreds of millions of dollars in insurance claims on thousands of mortgages that defaulted in connection with the FHA's Direct Endorsement Lender Program as a result of false certifications by Wells Fargo, according to the complaint."

The Wall Street Journal reports that the government alleges the misconduct dates back to 2001. Essentially, the U.S. says the company issued more than 100,000 loans it said met Federal Housing Administration requirements when they did not.

"The complaint alleges that the bank knew that in at least half the cases those loans didn't meet federal requirements that would allow them to be insured by the government," the Journal reports.

Wells Fargo denied the allegations.

""Many of the issues in the lawsuit had been previously addressed with HUD," Wells Fargo said in a statement emailed to The Los Angeles Times. "Wells Fargo is the leading FHA lender and has acted as a prudent and responsible lender with FHA delinquency rates that have been as low as half the industry average. The Bank will present facts to vigorously defend itself against this action. Wells Fargo is proud of its long involvement in the FHA program, which has helped so many people obtain affordable mortgages and become homeowners."

Copyright 2020 NPR. To see more, visit https://www.npr.org.

Related Content
  • The suit relates to the securities sold by Bear Stearns, which collapsed in 2008 and is now owned by JPMorgan. It's the suit first to be filed under the auspices of the RMBS Working Group, set up by President Obama to investigate and prosecute alleged misconduct that contributed to the financial crisis.
  • The national bank settlement over robo signing takes effect Wednesday. And the California monitor for the settlement says the most notable complaint her office gets is for "dual-tracking." That's when homeowners are on track to be foreclosed on while trying to get a mortgage modification.
  • The housing market is recovering — very slowly.
  • The bank said Friday it will pay $2.43 billion to settle a lawsuit related to its purchase of Merrill Lynch in 2008 at the height of the financial crisis. Investors who owned Bank of America stock at the time brought the class-action suit, claiming bank officials made false statements about the health of both companies at the time of the merger. Bank of America denied the allegations.