From Jan. 1, 2002 through Dec. 31, 2010, Wells Fargo intentionally concealed the problems with 6,320 loans it had determined were "seriously deficient" from the Federal Housing Administration, which insured the loans, according to the complaint filed in Manhattan federal district court. The bank didn't report the problems with the loans even after its own risk department conducted reviews that according to one bank employee, unearthed "a dirty underbelly of bad loan officers," the lawsuit claims.
“As the complaint alleges, yet another major bank has engaged in a long standing and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," said Manhattan U.S. Attorney Preet Bharara, who brought the case, in a statement.
Wells Fargo is one of hundreds of banks permitted to certify mortgages for government backing by the FHA. Should these loans fail, the FHA, a division of the U.S. Department of Housing and Urban Development, will reimburse whoever holds the loans for the charges they incurred.
Because of this guarantee, millions of moderate and low-income borrowers who wouldn't otherwise qualify for a mortgage have been able to take out a home loan. But an investigation by federal authorities has found that many of these loans were improperly certified by bank mortgage officers that ignored lending standards in an effort to pad their bonus checks.
Citigroup, Flagstar Bank, Bank of America, Deutsche Bank and FBC collectively have repaid the FHA $1 billion following legal settlements in cases similar to the one brought against Wells Fargo.
In this case, federal prosecutors allege that Wells Fargo's brokers issued loans that shouldn't have qualified, and then the bank lied about it to the government. The lawsuit also alleges that Wells Fargo's bonus incentive plan, which rewarded employees based on the sheer number of loans approved, "was an accelerant to a fire already burning, as quality repeatedly took a backseat to quantity."
“Many of the issues in the lawsuit had been previously addressed with HUD,” the bank said in a 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.”
Original Article
Source: huffington post
Author: Ben Hallman
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