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Wells Fargo Continues to Battle FHA Suit

The Federal Housing Administration’s [1] 2012 lawsuit against Wells Fargo [2] could take longer to resolve, according to a wells fargo [3]story written by the Wall Street Journal. According to statements released in the bank’s annual report, "previous resolution discussions" with the FHA "did not result in an acceptable final agreement" and that the bank is "again engaged in discovery."

Charges against Wells Fargo were filed on October 9, 2012, in the U.S. District Court for the Southern District of New York. The bank is alleged to have participated in “reckless” origination and underwriting of its FHA mortgage loans from May 2001 to October 2005.

Wells Fargo is alleged to have received insurance money from the U.S. Department of Housing and Urban Development [4] even after some loans had defaulted. The bank allegedly submitted over 100,000 FHA loans said to be under HUD compliance and eligible for insurance, knowing that the loans were too risky and did not qualify.

The complaint about Wells Fargo's practices said, "The extremely poor quality of Wells Fargo’s loans was a function of management’s nearly singular focus on increasing the volume of FHA originations – and the bank’s profits – rather than on the quality of the loans being originated."

Discussions to settle the suit happened late last summer when the bank was in negotiations with the U.S. Attorney General for a settlement of $500 million, but when the Justice Department asked the bank for more evidence several months ago settlement discussion hit a standstill, according to the Wall Street Journal. Wells Fargo has yet to figure out what the next step for them with this suit will be.

"Our good faith efforts to work with the federal government on a possible resolution of the complaint has not resulted in a settlement," Wells Fargo spokesman Tom Goyda said. "As a result, we are moving forward to present our case in support of our prudent and responsible FHA lending practices, which have produced high-quality FHA loans with delinquency rates that are half the industry average. Wells Fargo has a longstanding record as a leading provider of FHA loans, which have helped so many people become homeowners."