US Files Civil Suit vs. Wells Fargo

Feds say that Wells Fargo was systematically misrepresented quality of FHA home loans.

Wells Fargo is the country’s fourth-biggest bank by assets and its biggest mortgage lender.

The government filed a civil suit against Wells Fargo in an effort to recover what it says is hundreds of millions of dollars that the Federal Housing Administration (FHA) lost when home borrowers defaulted on many of Wells Fargo’s home mortgage loans.

The FHA insurance insures lenders against loss on home mortgage loans and allows borrowers to purchase a home with as little as 3 1/2% down payment. The FHA home loan insurance program is perhaps the main financing vehicle for first-time home buyers.

This government lawsuit says that Wells Fargo falsely certified that a large number of loans were eligible for the FHA insurance, when the government alleges they were not. Naturally, Wells Fargo disputes these allegations and says that it will vigorously defend the lawsuit in court.