Business

US sues Wells Fargo for mortgage fraud

Wednesday, October 10, 2012    

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NEW YORK, USA — THE United States filed suit yesterday against US banking giant Wells Fargo, alleging mortgage fraud that cost the government hundreds of million of dollars after the home loans defaulted.

The civil fraud lawsuit, filed by Manhattan US Attorney Preet Bharara in New York federal court, seeks to recover damages in connection with Wells Fargo's residential mortgage lending business.

The San Francisco-based bank is the nation's largest mortgage lender.

As a result of Wells Fargo's false certifications of mortgages, the Federal Housing Administration has paid "hundreds of millions of dollars in insurance claims on thousands of mortgages that defaulted," the US attorney's office for the Southern District of New York said.

It claimed the alleged misconduct occurred for more than 10 years.

"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," Bharara said.

Bharara said that Wells Fargo began meeting the requirement to self-report bad loans in a significant way only after the US attorney's office issued a subpoena last year.

"Now a jury will have to weigh the facts to determine the bank's liability and the scope of the damages it must pay," he said.

Wells Fargo shares closed 1.96 per cent lower at US$35.10 in New York.

—AFP

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