Homeowners who found Wells Fargo had no sympathy for them in the foreclosure process may now show little sympathy for the banking giant. The U.S. Attorney for the Southern District of New York alleges Wells Fargo engaged in mortgage fraud and socked the company with a civil fraud lawsuit charging it defrauded the government out of hundreds of millions of dollars.
The complaint says, Wells Fargo made 100,000 mortgages between May 2001 and October 2005 that were backed by FHA insurance. That meant if homeowners defaulted the bank wouldn’t lose because the FHA, the government, would repay the bank. Prosecutors claim that at least half of the mortgages weren’t properly vetted and failed to meet FHA standards.
U.S. Attorney Preet Bharara said Wells Fargo relied, “…on the convenient backstop of government insurance.” He said the company gave bonuses to employees and rewarded them based, “…on the sheer number of loans approved.” In addition the lawsuit charges the bank failed to properly report potential defaults to HUD, which runs the FHA program. The case will go to a jury unless there’s a settlement, and the U.S. Attorney is asking for treble damages for the government.
In a statement, Wells Fargo, told ConsumerMojo.com that, “it denies the allegations and believes that it acted in good faith and in compliance with Federal Housing Administration (FHA) and Department of Housing and Urban Development (HUD) rules.” The statement went on to say that, “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 have the industry average.” In addition, it says, “Wells Fargo is proud of its long involvement in the FHA program, which has helped so many people obtain affordable mortgages and become homeowners.”