Wells Fargo was sued yesterday by the US Attorney's office for mortgage fraud because it allegedly certified loans improperly. The lawsuit seeks hundreds of millions of dollars in damages. The lawsuit was brought under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The lawsuit deals specifically with the lender's participation in the FHA's Direct Endorsement Lender Program.
Basically, the lawsuit says that FHA had to pay millions in insurance for defaulted loans based upon receiving inaccurate information by Wells.
This is yet another example about how the days of the smoke in the mirror test are over & lenders are now required to perform necessary due diligence to ensure that borrowers should be given loans.
To read the US Attorney's Press Release concerning this lawsuit, click here.