October 4, 2012
October 4, 2012 — Federal prosecutors have alleged that Wells Fargo engaged in reckless and fraudulent mortgage lending practices that cost the Federal Housing Administration hundreds of millions of dollars in insurance claims when many of those mortgage loans failed. The civil suit accuses Wells Fargo of hiding the true risk of at least 6,320 mortgages insured by the Federal Housing Administration (FHA).
Wells Fargo allegedly ignored warnings from its employees that many of the lender’s loans involved fraud or serious violations. Wells Fargo instead incentivized its poorly trained staff to continue making risky loans. When the loans defaulted in large numbers, the federal government was saddled with massive insurance claims by Wells Fargo. According to federal prosecutors, Wells Fargo is guilty of a number of failures:
Wells Fargo allegedly continued to rake in interest on risky loans while relying on federal insurance to blunt the substantial risk that the mortgages would fail.
Wells Fargo claims that it acted in good faith and complied with FHA standards. Wells Fargo also claims that its FHA delinquency rates are far lower than the industry average.
For now, the lawsuit represents another significant blow to the bank’s reputation. Wells Fargo has already agreed to a $175 million settlement with the Department of Justice in July 2012 to resolve claims that it put black and Latino homeowners into high-priced subprime loans at disproportionately high rates. Shortly before announcing that settlement, Wells Fargo agreed to a $6.5 million settlement with the Securities and Exchange Commission (SEC) to resolve claims that it sold high-risk mortgage securities without disclosing the relevant risks to investors. Wells Fargo also was part of a five-bank $25 billion settlement to resolve allegations of widespread foreclosure abuses.
Whistleblowers are valuable allies in fighting financial fraud, so that both the SEC and the FCTC maintain whistleblower programs and offer rewards under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010 to whistleblowers who provide relevant and important information that enables the agencies to recover sanctions over $1 million.
The attorneys at Waters & Kraus have extensive experience working with whistleblowers in a variety of fraud cases. Contact us or call our whistleblower attorneys at 800.226.9880 to learn more about our practice and how we can assist.
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Confidential settlement for the wife of a Rhode Island man who died of mesothelioma cancer after exposure to window glazing compound contaminated with asbestos.
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