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 The settlement with Wells Fargo, the largest U.S. mortgage lender
and third-largest U.S. 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 San Francisco-based 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.
According to the Justice Department, the shortfalls led to
substantial losses for taxpayers when the FHA was forced to pay
insurance claims as defective loans soured.
Several lenders, including Bank of America Corp <BAC.N>, Citigroup
Inc <C.N>, Deutsche Bank AG <DBKGn.DE> and JPMorgan Chase & Co
<JPM.N>, previously settled similar federal lawsuits.
But Wells Fargo held out, and its payment is the largest in FHA
history over loan origination violations.
Friday's settlement is a reproach for "years of reckless
underwriting" at Wells Fargo, U.S. Attorney Preet Bharara in
Manhattan said in a statement.
"While Wells Fargo enjoyed huge profits from its FHA loan business,
the government was left holding the bag when the bad loans went
bust," Bharara added.
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The accord also resolved a probe by federal prosecutors in
California of alleged false loan certifications by American Mortgage
Network LLC, which Wells Fargo bought in 2009.
No one has been criminally charged in the probes, and the Justice
Department reserved the right to pursue criminal charges if it
wishes, according to the settlement.
Franklin Codel, president of Wells Fargo Home Lending, in a
statement said the settlement "allows us to put the legal process
behind us, and to focus our resources and energy on what we do best
-- serving the needs of the nation's homeowners."
Lewis Liman, a lawyer for Lofrano, did not immediately respond to
requests for comment.
Wells Fargo on Feb. 3 said the settlement would reduce its
previously reported 2015 profit by $134 million, to account for
extra legal expenses.
The case is U.S. v. Wells Fargo Bank NA, U.S. District Court,
Southern District of New York, No. 12-07527.
(Reporting by Jonathan Stempel and Nate Raymond in New York; Editing
by Dan Grebler)
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