NEW YORK - A civil mortgage fraud lawsuit against Wells Fargo Bank, N.A. The Government’s Complaint seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) for more than 10 years of misconduct in connection with Wells Fargo’s participation in the Federal Housing Administration (“FHA”) Direct Endorsement Lender Program. The lawsuit alleges that, as a result of Wells Fargo’s false certifications, FHA has paid hundreds of millions of dollars in insurance claims on thousands of mortgages that defaulted.

Manhattan U.S. Attorney Preet Bharara said: “As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance. As also alleged, Wells Fargo’s bonus incentive plan – rewarding employees based on the sheer number of loans approved – was an accelerant to a fire already burning, as quality repeatedly took a back seat to quantity. What’s more, even after concerns were raised internally at the bank, Wells Fargo began self-reporting bad loans in a significant way, as required, only after this Office issued a subpoena last year. Now a jury will have to weigh the facts to determine the bank’s liability and the scope of the damages it must pay.”

The Complaint seeks treble damages and penalties under the False Claims Act, 31 U.S.C. §§ 3729 et seq., as well as FIRREA penalties, for hundreds of millions of dollars in insurance claims already paid by HUD for mortgages wrongfully certified by Wells Fargo. In addition, the United States seeks compensatory damages under the common law theories of breach of fiduciary duty, gross negligence, negligence, unjust enrichment, and payment under mistake of fact, for the hundreds of millions of dollars in insurance claims that HUD has paid, and expects to pay in the future, for mortgages wrongfully certified by Wells Fargo.