Danielle Douglas and Brady Dennis
October 10, 2012
Wells Fargo engaged in a long-standing practice of reckless and fraudulent mortgage lending that cost the government hundreds of millions of dollars in insurance claims when those loans went bad, federal prosecutors alleged Tuesday.
In a civil lawsuit filed in Manhattan federal court, government lawyers accused the San Francisco-based bank of concealing the true nature of at least 6,320 shoddy mortgages that were insured by the Federal Housing Administration. The government is seeking unspecified civil penalties that could reach into the hundreds of millions of dollars.
For nearly a decade, the nation’s largest home mortgage lender routinely ignored warnings from its own employees of loans rife with serious violations or fraud, prosecutors said. Instead, Wells Fargo gave a poorly trained staff incentives to keep churning out bad loans. When struggling homeowners stopped making monthly payments, the loans defaulted in mass, leaving the government on the hook for massive insurance payouts to the bank.