The U.S. government has filed a civil lawsuit against Wells Fargo, alleging that it lied about the quality of the mortgages it was handling under a federal housing program.
Miami foreclosure attorneys understand that the suit was filed in Manhattan, but it covers risky mortgages from across the country that were bundled and sold to unwitting investors. What’s more, those loans were insured by the government, specifically, the Federal Housing Administration.
This is a major part of what led to the U.S. housing crisis and economic bubble burst in 2008.
According to the lawsuit, Wells Fargo, which is the country’s biggest provider of home loans, had been ripping off the government for more than 10 years. These were loans that, due to the conditions, would not have been eligible for government-provided insurance. But in order to get them insured, the suit claims, the bank lied about the quality. When the loans inevitably defaulted, because the eligibility of the homeowners had been artificially inflated, the government was left holding the bill.
Now, the federal government is seeking to recover hundreds of millions of dollars in damages from Wells Fargo. Specifically, the government is alleging a lack of training, poor underwriting and a failure to disclose. It’s alleged that the banks hired temporary staffers to crank out the faulty loans, while also providing improper incentives to underwriters who were able to quickly finagle F.H.A. approval. The bank knew about all this, the government said, and did everything it could to hide these facts from the housing agency.
U.S. Attorney General Eric Holder has said similar lawsuits against other banks may be in the pipeline.
Of course, Wells Fargo is defending its actions, saying that it acted responsibly and in “good faith.”
This case comes after a host of civil actions filed by the government against big banks for their reckless lending practices. Most of those banks have settled, the largest of those being Bank of America for $1 billion.
The government is backing its stance with use of the Financial Institutions Reform, Recover and Enforcement Act. It’s a rarely-used statute that was approved after the savings-and-loans scandals back in the 1980s. Essentially, it provides the government an avenue to pursue claims and obtain large monetary penalties against banks that are insured by the federal government. What is also promising is that unlike criminal business fraud laws, there is a lower standard of proof for the government in cases filed under this statute.
Although the federal government is to be commended for bringing this action, it does come too little too late for the countless homeowners who suffered as a result of Wells Fargo’s actions, and those by other large banks. The Justice Department has been rightly criticized for not taking swifter and more decisive action on these matters in the past – particularly against the executives and administrators of these large financial institutions.
Prosecutors have complained that these are tough cases to bring forward, as they do require a standard proof beyond a reasonable doubt.
If your home is underwater and you are facing foreclosure, we can help.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
U.S. Sues Wells Fargo, Accusing It of Lying About Mortgages, Oct. 9, 2012, By Peter Lattman, New York Times
More Blog Entries:
South Florida Homeowners Beware: Banks Now Faking Debt Forgiveness, Oct. 1, 2012, Miami Foreclosure Lawyer Blog