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Wells Fargo to pay $1.7b in US mortgage fraud settlement

todayonline.com | February 5, 2016

NEW YORK — Wells Fargo, the largest mortgage lender in the United States, has agreed to pay US$1.2 billion ($1.7 billion) to settle claims that it had engaged in mortgage fraud during the sub-prime housing scandal that ignited the 2008 global financial crisis.

The settlement resolves a lawsuit filed in the federal court in Manhattan in 2012 accusing Wells Fargo of engaging in misconduct in originating and underwriting government-insured mortgages. The lawsuit, brought by Manhattan US Attorney Preetinder Bharara’s office, was among a series of cases against banks following the financial crisis stemming from mortgages insured through a programme by the Federal Housing Administration (FHA).

Wells Fargo, based in San Francisco, had hitherto been a holdout among large lenders. Several lenders including Bank of America, Citigroup and Deutsche Bank have resolved similar lawsuits over FHA-insured loans, paying hundreds of millions of dollars to settle their cases. Wells Fargo said the settlement was reached on Feb 1 and would also resolve claims by the US Attorney’s Office in San Francisco and the US Department of Housing and Urban Development.

The 2012 lawsuit accused Wells Fargo of engaging in a “reckless trifecta” of poor training, deficient loan underwriting and poor disclosure in the government-backed loan programme. It also said Wells Fargo had failed to report more than 6,000 loans from 2002 to 2010 that did not meet requirements for insurance under the FHA and failed to properly review early payment defaults.

Regulators have contended that the bank should not have received the insurance proceeds after some of the loans soured. The agreement also includes other potential civil claims relating to FHA lending for other periods, Wells Fargo said.

Beyond naming Wells Fargo as a defendant, the civil lawsuit named Mr Kurt Lofrano, a vice president at the bank accused of playing a “critical role” in not reporting the loans to government officials. It was not clear if Wells Fargo’s settlement applied to Mr Lofrano but a letter filed by lawyers who work with Mr Bharara said the deal resolves “all claims in this matter.”

The letter said the full agreement was still being drafted and needed to be approved by US Justice Department officials. The parties plan to provide a status report to the court by Feb 17, the letter said.




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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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