Wells Fargo to Pay $1.2 Billion for Hiding Bad Mortgages Before Housing Crash
“Wells Fargo enjoyed huge profits from its FHA loan business, the government was left holding the bag when the bad loans went bust,” the U.S. Attorney said in a statement. “Today, Wells Fargo, one of the biggest mortgage lenders in the world, has been held responsible for years of reckless underwriting.”
The case involved Wells Fargo representatives certifying that thousands of FHA mortgages it made met FHA underwriting standards related to the borrowers’ income, property value, and other criteria. Many homeowners, however, failed to meet these criteria and never actually qualified. “Driven to maximize profits, Wells Fargo employed shoddy underwriting practices to drive up loan volume, at the expense of loan quality,” said the U.S. Attorney.
When a homeowner defaults on an FHA loan, the government picks up the tab and pays the bank back for its losses. In these cases, when some homeowners were foreclosed upon, the government had to pay Wells Fargo.
In fact, even though Wells Fargo identified through internal quality assurance reviews thousands of problematic mortgage loans, the bank decided not to report them to the government.
As part of this mortgage settlement, they have agreed to acknowledge and accept responsibility for this misconduct.
Here is the link: Mortgage Settlement Press Release