Wells Fargo Settles FHA Mortgage Fraud Case
Yesterday, Well Fargo & Co. announced the banking giant had reached a $1.2 billion settlement with the U.S. government over allegations that it defrauded the Federal Housing Administration. The San Francisco based bank said in an SEC filing that a deal in principal had been reached to resolve the fraud claims, involving the submission of non-conforming loans, levied against it.
Wells Fargo said that the settlement, if finalized, would resolve claims related to mortgages it issued from 2001 through 2010, as well as other potential civil claims related to loans issued in other periods. The settlement would require Wells Fargo to add an additional $200 million in legal expenses to its 2015 earnings and thereby reducing its fiscal year 2015 profits by $134 million.
The Justice Department, which is representing the FHA. declined to comment on the potential deal.
Wells Fargo was just one of many financial institutions to get hit with lawsuits alleging that it submitted mortgages for FHA backing that did not meet the agency’s underwriting standards. The FHA program relies upon rigorous self-reporting of any problems with the mortgages that a bank or mortgage company originates. Wells Fargo was one of a few institutions to dispute the allegations involving FHA lending to court.
Most other institutions have chosen to resolve claims related to the FHA without a high-profile court fight.
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