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U.S. Can Add Wells Fargo Exec as Mortgage Fraud Defendant

reuters.com | December 13, 2013

By Jonathan Stempel

Dec 12 (Reuters) - The United States may add Wells Fargo & Co Vice President Kurt Lofrano as a defendant in its year-old lawsuit accusing the country's largest mortgage lender of fraud, a Manhattan federal judge said.

Lofrano would be the first individual targeted in the lawsuit, which was originally brought in October 2012.

The U.S. Department of Justice accused Wells Fargo of misleading the Department of Housing and Urban Development into believing many of its loans qualified for federal insurance, costing taxpayers hundreds of millions of dollars.

Wells Fargo had questioned why the government waited a year before pursuing Lofrano, suggesting it might be in retaliation for the bank's late October decision to end settlement talks.

U.S. District Judge Jesse Furman nonetheless concluded that the government could add Lofrano and amend its complaint, substantially for the reasons it cited.

The government said Lofrano played a "critical role" in Wells Fargo's decision not to report to HUD more than 6,000 materially defective loans that the San Francisco-based bank falsely certified for Federal Housing Administration insurance.

It also said Lofrano, as vice president for quality control from 2002 to 2010, was responsible to ensure proper reporting but kept many defective loans "secret," causing HUD to pay more than $189 million in insurance for loans that were not eligible.

The government seeks to hold Lofrano liable under the federal False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

Wells Fargo spokesman Ancel Martinez said, "We are disappointed in the ruling, but respect the court's decision, and we fully support Mr. Lofrano."

Federal investigators have received much criticism for failing to hold enough individuals accountable for activities contributing to the recent U.S. housing and financial crises.

One exception is Rebecca Mairone, a former midlevel executive at Bank of America Corp's Countrywide unit who with that bank was found liable by a Manhattan federal jury in October for selling defective home loans to Fannie Mae and Freddie Mac. Damages have not been set.

Furman said the government in the Wells Fargo case shall file its second amended complaint by Dec. 20.

The case is U.S. v. Wells Fargo Bank NA, U.S. District Court, Southern District of New York, No. 12-07527.


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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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