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