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Wells Fargo Asks Judge to Dismiss U.S. Mortgage Loans Suit

businessweek.comApril 18, 2013

By Bob Van Voris

Wells Fargo & Co. (WFC) asked a judge to dismiss a suit by the U.S. government claiming the bank made reckless mortgage loans that caused losses for a federal insurance program.

The U.S. suit alleges more than a decade of misconduct by Wells Fargo in connection with a Federal Housing Administration program. Wells Fargo argued that the government’s suit, which was filed in October, should be dismissed because it fails to adequately allege facts that would allow the case to go forward.

“The complaint tells a nice story, but they fail to connect the dots,” William Johnson, a lawyer for San Francisco- based Wells Fargo, told U.S. District Judge Jesse Furman in a hearing today in Manhattan federal court.

The U.S. claims the FHA paid hundreds of millions of dollars in insurance claims on defaulted mortgages in connection with the FHA’s Direct Endorsement Lender Program as a result of false certifications by Wells Fargo.

In the hearing today, Wells Fargo argued that the U.S. released claims against it in a settlement last year. The bank also said the government’s claims for conduct before June 25, 2006, were filed too late and that the U.S. failed to allege specific facts showing the bank engaged in fraud.

The bank claimed the government is trying to misapply a 1989 law enacted in the wake of the savings and loan crisis, the Financial Institutions Reform, Recovery and Enforcement Act.


‘No Good’

“Wells Fargo knew these loans were no good, but submitted the claims,” Assistant U.S. Attorney Jeffrey Oestericher argued at the hearing. “And that is fraud.”

The lawsuit is part of a larger effort by the U.S. government to recoup losses from defaulted mortgages that were insured by the FHA.

The Department of Housing and Urban Development’s inspector general has been reviewing loan origination practices since January 2010. An audit released in 2011 found that half of loans originated by 15 lenders didn’t meet FHA standards for verifying borrowers’ income and other underwriting standards. The agency has paid more than $37 billion in claims related to defaulted mortgages since 2008.

“These are extremely complicated and convoluted issues,” Furman told the lawyers. He didn’t say when he will rule on the motion to dismiss.

The case is U.S. v. Wells Fargo Bank N.A., 12-cv-07527, U.S. District Court, Southern District of New York (Manhattan).

Back to April 2013 Archive

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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