Compelo Banking is using cookies

We use them to give you the best experience. If you continue using our website, we'll assume that you are happy to receive all cookies on this website.

ContinueLearn More
Close
Dismiss

US files lawsuit against Wells Fargo over civil mortgage fraud

Wells Fargo & Co is the latest major bank that has been charged by the US government over a civil mortgage fraud lawsuit related to government-insured Federal Housing Administration (FHA) loans.

The US Attorney in Manhattan Preet Bharara (complaint) has alleged in the lawsuit that the bank issued false certifications on numerous defaulted mortgages for more than 10 years, resulting in FHA paying a huge sum on insurance claims, as reported by Reuters.

Under the Direct Endorsement Lender program, wherein lenders are required to follow the rules, the bank certified more than 100,000 loans for FHA insurance between May 2001 and October 2005.

Around 42% of the bank’s FHA loans were not eligible for insurance during a seven-month period in 2002, while over 6,000 "materially deficient" loans, including 3,000 defaulted were also kept secretive from January 2002 to December 2010.

The bank also violated self-reporting obligations as it disclosed only 238 loans from 2002 through 2010, according to the complaint.

Additional charges include improper staff training and bonuses to its underwriters, recruitment of temporary workers as well as failure to report another $190m in loans.

The complaint has sought for three times damages and penalties in insurance claims that have been paid to Wells, including fines on future HUD claims.

The US mortgage lender, however, has denied the allegations that have been brought under the False Claims Act.