U.S. Government Sues Wells Fargo for Mortgage Fraud

by Christopher Freeburn | October 10, 2012 12:08 pm

The U.S. government is suing Wells Fargo (NYSE:WFC[1]), accusing the bank of providing mortgage loans[2] 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[3]), Bank of America (NYSE:BAC[4]) and Citigroup (NYSE:C[5]) 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 lastĀ 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[6]) 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.

Endnotes:
  1. WFC: http://studio-5.financialcontent.com/investplace/quote?Symbol=WFC
  2. providing mortgage loans: http://www.sfgate.com/business/bloomberg/article/Wells-Fargo-Sued-Over-Claims-It-Cheated-FHA-on-3934109.php
  3. DB: http://studio-5.financialcontent.com/investplace/quote?Symbol=DB
  4. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  5. C: http://studio-5.financialcontent.com/investplace/quote?Symbol=C
  6. JPM: http://studio-5.financialcontent.com/investplace/quote?Symbol=JPM

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