by Christopher Freeburn | October 10, 2012 12:08 pm
The U.S. government is suing Wells Fargo (NYSE:WFC), accusing the bank of providing mortgage loans backed by a Federal Housing Administration (FHA) program to unqualified applicants. The government is seeking unspecified damages and penalties under the False Claims Act. A potential award in the governments favor could be in the hundreds of millions of dollars, Bloomberg noted.
Federal prosecutors have sued a number of large banks, including Deutsche Bank (NYSE:DB), Bank of America (NYSE:BAC) and Citigroup (NYSE:C) over failed mortgage loans backed by government insurance.
Government regulators are investigating mortgage lending practices for compliance with FHA standards. The FHA has spent $37 billion covering claims on failed mortgages over the last four years.
Wells Fargo has emerged as the leading U.S. mortgage lender, accounting for 33.1% of mortgages approved during the first half of 2012. The second-ranked lender, JPMorgan Chase (NYSE:JPM) provided 11.1% of mortgages.
The lawsuit is the latest legal action against Wells Fargo by the federal government. The bank settled claims of racial discrimination in lending in July, paying $125 million in fines and another $50 million to assist victims.
Wells Fargo shares rose fractionally in mid-day trading on Wednesday.
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