Wells Fargo & Co. (WFC) was sued by the U.S. for hundreds of millions of dollars in damages over claims the bank made reckless mortgage loans that caused losses for a federal insurance program when they defaulted.
The complaint filed yesterday in federal court in New York, which alleges misconduct spanning more than a decade related to the bank’s participation in a Federal Housing Administration program, follows similar cases against other lenders, including Citigroup Inc. (C) and Deutsche Bank AG. (DBK)
“As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance,” U.S. Attorney Preet Bharara said in the statement.
Yesterday’s lawsuit undermines San Francisco-based Wells Fargo’s reputation as a lender that avoided some of the industry’s worst underwriting practices and threatens to compound the bank’s costs as the government completes probes of the housing bubble’s collapse.
The firm, now the largest U.S. home lender, paid $125 million and set up a $50 million assistance fund to settle federal claims in July that it discriminated against minority borrowers. The settlement was the second-largest fair-lending accord reached by the Justice Department at the time.
