Wells Fargo to Pay $1.2b for Hiding Bad Loans before Housing Crash
Wells Fargo & Co admitted to deceiving the US government into insuring thousands of risky mortgages, as it formally reached a record $1.2-billion settlement of a US department of justice lawsuit. The set t lement wit h Wel l s Fargo, the largest US mortgage lender and third-largest US bank by assets, was filed on Friday in Manhattan federal court. It also resolves claims against Kurt Lofrano, a former Wells Fargo vice president.
According to the settlement, Wells Fargo “admits, acknowledges and accepts responsibility” for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance. The lender also admitted to having from 2002 to 2010 failed to file timely reports on several thousand loans that had material defects or were badly underwritten, a process that Lofrano was responsible for supervising.
The shortfalls led to substantial losses for taxpayers when the Federal Housing Administration (FHA) was forced to pay insurance claims as defective loans soured.