Wells Fargo Lawsuit Not Barred by Earlier Deal, U.S. Says
Wells Fargo & Co. (WFC) can be sued in a federal lawsuit in New York over mortgage foreclosure practices without violating the terms of a settlement reached with the bank in another case, the Justice Department said.
The department, in a filing yesterday in federal court in Washington, said the bank’s allegation that the U.S. breached the terms of the $5 billion deal by suing in federal court in New York for hundreds of millions of dollars based on conduct that Wells Fargo is no longer liable for is “flatly inconsistent” with the terms of the settlement.
The New York case is premised on Wells Fargo, the biggest U.S. home lender, knowing that the origination of loans insured by the Federal Housing Administration didn’t meet agency requirements, resulting in “substantial losses” to the FHA insurance fund, according to the filing.
The settlement “only bars the government from asserting a very specific type of claim, i.e., where its ’sole basis’ is Wells Fargo’s submission of a false annual certification in connection with maintaining its status as an FHA-approved Direct Endorsement Lender,” John Warshawsky, a Justice Department lawyer, said in the filing.
$25 Billion Deal
The department’s filing was submitted to U.S. District Judge Rosemary Collyer, who on April 4 approved a $25 billion agreement with five banks to settle U.S. and state probes into abusive foreclosure practices. On Oct. 9, the U.S. sued Wells Fargo in New York, claiming the bank made reckless mortgage loans that caused losses for a federal insurance program when they defaulted.
On Nov. 1, Wells Fargo accused the U.S. of violating the settlement by filing the New York lawsuit.
Oscar Suris, a spokesman for San Francisco-based Wells Fargo, didn’t immediately respond to an e-mail yesterday after regular business hours seeking comment on the filing.
The Washington case is U.S. v. Bank of America Corp., 12- cv-00361, U.S. District Court, District of Columbia (Washington). The New York case is U.S. v. Wells Fargo Bank N.A., 12-cv-07527, U.S. District Court, Southern District of New York (Manhattan).
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