Here’s Why Federal Prosecutors are Suing Wells Fargo, Again
However, the U.S. attorney’s office felt otherwise. Federal prosecutors sued the United States’ largest home lender in September for “reckless” and fraudulent mortgage practices that cost the Federal Housing Administration hundreds of millions of dollars in insurance claims when the loans defaulted.
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Earlier this year, Wells Fargo was one of five banks, including Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM), to settle U.S. and state probes into its fraudulent foreclosure practices with a $25 billion agreement.
Currently, both Bank of American and JPMorgan are facing further federal litigation as well.
In a filing made on Thursday in federal court in Washington D.C., Wells Fargo made clear its intent to challenge the suit, contending that the case violates the conditions of the April settlement.
“Wells Fargo committed billions to the United States in settlement…and should be able to rely on the United States to observe and abide by its commitments and representations,” said the bank in its filing.
The company has also denied the allegations outright, saying in a recent statement that the bank had acted in “good faith and in compliance” with the Federal Housing Administration’s regulations. The government’s lawsuit, which is part of a larger effort by the United States to recover losses from defaulted mortgages insured by the FHA, states the opposite.
The suit alleges that the bank’s misconduct has spanned more than a decade, and identifies Wells Fargo as one of 15 lenders that did not meet FHA standards for verifying borrowers’ income and other underwriting standards. In particular, the complaint accused Wells Fargo of certifying at least 6,320 mortgages for FHA insurance that it knew were poorly underwritten. As a result of the poorly underwritten loans, the agency has had to pay more than $37 billion in insurance claims since 2008.
The United States government is seeking to recover unspecified damages under the False Claims Act.
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