Wednesday, October 10, 2012

Feds: Wells Fargo Committed Mortgage Fraud, Costing U.S. Millions

Posted By on Wed, Oct 10, 2012 at 8:50 AM

Wells Fargo Bank was slapped with a lawsuit from the U.S. government this morning over claims the bank made "reckless" mortgage loans that defaulted and cost a federal insurance program hundreds of millions of dollars.

The complaint, filed in a New York Federal Court, is seeking unspecified damages and civil penalties for more than 10 years of misconduct, in which the bank “falsely certified loans insured by the government’s Federal Housing Administration.”

Reuters reports that the complaint also said that Wells Fargo “engaged in a regular practice of reckless origination and underwriting of its retail FHA loans … knowing that it would not be responsible when the materially deficient loans went into default.”

The complaint said the "extremely poor quality of Wells Fargo's loans was a function of management's nearly singular focus on increasing the volume of FHA originations—and the bank's profits—rather than on the quality of the loans," CNN reported.

Wells Fargo has denied the allegations.

The case is the fifth mortgage-fraud lawsuit brought against a major lender by the feds in the wake of the housing collapse and ensuing financial crisis. Most of those cases have been settled.

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