Wells Fargo & Co. was sued by the U.S. government over claims the bank committed fraud by making reckless mortgage loans, according to a complaint filed in Manhattan federal court Tuesday.
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.
Wells Fargo denies the allegations and “believes it acted in good faith and in compliance” with FHA and Department of Housing and Urban Development rules, the company said in a statement.
“Many of the issues in the lawsuit had been previously addressed with HUD,” the company said in the statement. “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.”
The company said the probe that led to the lawsuit was previously disclosed in a quarterly filing to the Securities and Exchange Commission.
Shares of Wells Fargo, the largest U.S. bank by market value, fell 2 percent to close at $35.10 in New York trading Tuesday. The shares were little changed in late trading after the lawsuit was announced.
The case is U.S. v. Wells Fargo Bank N.A., 12-cv-7527, U.S. District Court, Southern District of New York (Manhattan).
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