Wednesday, November 7, 2012

Wells Fargo Again Prosecuted by Federal Government for Mortgage Fraud

The Federal Government has Filed a Civil Mortgage Fraud Lawsuit Against Wells Fargo Bank for Fraud Over Ten Years with Regard to Federal Housing Administration Lending

The US Attorney for the Southern District of New York and the US Department of Housing and Urban Development have filed a civil mortgage fraud lawsuit against Wells Fargo bank.  The government is accusing Wells Fargo of more than ten years of fraud in relation to Wells Fargo’s participation in the Federal Housing Administration Lending ProgramMore specifically, the Federal Government claims that as a result of fraud by Wells Fargo, hundreds of millions of dollars in insurance claims were improperly paid to Wells Fargo by the government in relation to thousands of defaulted mortgages.  This means that your tax dollars, directly or indirectly, may have been illegally taken by Wells Fargo. 

Wells Fargo has denied the allegations, and presumably is not going to eagerly pay the $570 million dollar fine that the government is seeking.  That fine represents triple the damages that may have actually occurred in relation to over 6000 defaulted mortgages and the insurance claims paid on them. 

The lawsuit alleges, among other things, that Wells Fargo employed an irresponsible and potentially illegal bonus structure by which its employees received higher compensation if they approved more loans.  Not surprisingly, this led to many loans being approved that should not have been, with the end result being a higher rate of default.  Of course, the incredibly high rate of defaults the last few years has greatly contributed to the overall economic crisis in this country and to the catastrophic mortgage and housing market. Interestingly, in 2011 Wells Fargo became the largest US mortgage loan servicer. 

Of course, this lawsuit follows not long after the National Mortgage Settlement (also referred to as the “Department of Justice Settlement” or “DOJ Settlement”) was entered into earlier this year.  Just when Wells Fargo thought it might have a reduction in negative publicity, the opposite has occurred.

McGrath & Spielberger, PLLC provides assistance to those involved in mortgage disputes, including borrowers in need of mortgage relief services such as mortgage loan modification, foreclosure negotiation, refinancing, and deed-in-lieu or other negotiated settlement resolutions.