The United States government sued Wells Fargo under the False Claims Act for mortgage fraud. The False Claims Act provides a penalty for fraud against the government and its financial institutions. The government’s pleadings claimed damages and civil penalties from Wells Fargo. The pleadings specifically alleged for a 10 year period, Wells Fargo engaged in reckless deficient training, deficient underwriting and deficient disclosure while having the Federal Housing Administration paid hundreds of millions of dollars on insurance claims for thousands of defaulted mortgages as a result of false certifications by Wells Fargo. Wells Fargo is currently the fourth largest bank in the United States.
Wells Fargo Is Not the First Bank Sued by the Government
The United States government has previously brought lawsuits against Citigroup Incorporated’s unit, CitiMortgage Inc. This lawsuit was settled by Citigroup for $158 million dollars. In a lawsuit brought by the United States governments and against Deutsche Bank, Deutsche Bank paid $200 million dollars. In the largest case brought by the Federal Government, the U.S. Attorney’s Office in Brooklyn took action against Bank of America Corporation’s Country Wide unit. Bank of America settled this suit for 1 billion dollars earlier this year.
The lawsuit brought against Wells Fargo was pursuant to a program that allows banks to originate, underwrite and certify mortgages for FHA Insurance purposes. The lawsuit claims that Wells Fargo did not follow the FHA rules in underwriting their mortgages. Wells Fargo has stated they plan on vigorously defending themselves against this lawsuit.
Conclusion
It is most likely Wells Fargo will seek a monetary settlement related to this lawsuit. This was the road taken by Bank of America, Citigroup and Deutsche Bank when similar lawsuits were brought against them.
