Wednesday, October 10 09:22:57
In a civil lawsuit filed in Manhattan federal court, government lawyers accused the San Francisco-based bank,Wells Fargo of concealing the true nature of at least 6,320 shoddy mortgages that were insured by the Federal Housing Administration. The government is seeking unspecified civil penalties that could reach into the hundreds of millions of dollars.
For nearly a decade, the nation's largest home mortgage lender routinely ignored warnings from its own employees of loans rife with serious violations or fraud, prosecutors said. Instead, Wells Fargo gave a poorly trained staff incentives to keep churning out bad loans. When struggling homeowners stopped making monthly payments, the loans defaulted in mass, leaving the government on the hook for massive insurance payouts to the bank. "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," the U.S. attorney for the Southern District of New York, Preet Bharara, said in a statement.
For Wells Fargo, the accusations were yet another blow to its reputation. Despite upholding itself as a model of propriety in the mortgage industry, the bank has been hit with a series of civil actions. In one of the largest fair-lending payouts in history, Wells Fargo reached a $175 million settlement with the Justice Department in July to resolve accusations that it steered black and Latino borrowers into high-priced subprime loans.