Wells Fargo To Pay $1.2 Billion To Settle Govt. Lawsuit Over “Reckless” Mortgages

In Oct. 2012, the U.S. Department of Justice sued Wells Fargo, alleging that the mega-bank had defrauded taxpayers by issuing “reckless” mortgages then misleading the Federal Housing Administration about the quality of those loans. Today, Wells revealed that has agreed to pay $1.2 billion to close the book on this issue.

The revelation of the pending settlement came this morning in a filing with the Securities and Exchange Commission. Wells discloses that it reached an agreement on Feb. 1 with the DOJ, the U.S. Attorney’s Offices for the Southern District of New York and the Northern District of California, and the U.S. Dept. of Housing and Urban Development.

The filing cautions that this agreement is not fully set in stone and “there can be no assurance that the Company and the Federal Government will agree on the final documentation of the settlement.”

When the government sued Wells, it said that the bank had misled the the FHA about the health of more than half of the FHA-insured loans issued by the bank between 2001 and 2010. When the poorly underwritten loans failed, the FHA was left to foot the bill.

Back in 2012, the prosecutor on the case said the bad loans resulted from a “longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure” that relied on the “convenient backstop of government insurance.”

In response, Wells said at the time that it had “acted as a prudent and responsible lender with FHA delinquency rates that have been as low as half the industry average.”

by Chris Morran via Consumerist