Protesters hold signs during a demonstration outside of a Wells Fargo shareholders meeting in San Francisco, California. (File photo)
The United States government has filed a civil lawsuit against Wells Fargo & Co., accusing it of defrauding a mortgage insurance program of hundreds of millions of dollars by improperly underwriting over 100,000 home loans.
Tuesday’s civil lawsuit is a latest in a series of legal actions Washington has planned to take against big banks and other financial institutions for their improper lending during the housing boom that caused the housing market collapse in 2008.
The lawsuit, the US Attorney in Manhattan and the US Department of Housing and Urban Development (HUD), seeks damages and civil penalties for misconduct related to government-insured Federal Housing Administration (FHA) loans of hundreds of millions of dollars over more than a decade.
The complaint alleges that Wells Fargo, the fourth-biggest US bank, issued false certifications on thousands of defaulted home mortgages and the FHA had to pay “hundreds of millions of dollars” on these claims.
“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,” said Manhattan US Attorney Preet Bharara.
Later in the day, Wells Fargo issued a statement, denying the allegations, and claiming that the bank acted in good faith and according to the rules and regulations of the FHA and HUD.
Wells Fargo is the largest provider of US home loans and runs the biggest servicing operation, which handles billings, collections, and foreclosures for banks and investors who own mortgages. It expanded across the United States after buying North Carolina-based Wachovia Corp in 2008.