Wells Fargo agreed to pay $1.2 billion in a settlement with the United States government regarding its practices of failing to disclose the approval of faulty mortgage loans in advance of the 2008 housing market crash. The bank admitted to failing to self-report thousands of problematic loans, as well as participating in practices such as hiring inexperienced employees in order to increase the volume of approved loans and drive profits. Executive Kurt Lofrano also admitted to overseeing a team of bankers who certified bad loans and failing to report them as Vice President of Credit-Risk.
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WASHINGTON, April 9 (UPI) -- Wells Fargo agreed to pay a $1.2 billion settlement for failing to disclose faulty loans to the Department of Housing and Urban Development.
The Department of Justice announced the settlement Friday, as Wells Fargo admitted it hid loans from HUD, contributing to the housing market crash of 2008.
The bank accepted responsibility for falsely certifying that some residential home mortgage loans were eligible for Federal Housing Administration insurance when they were not, forcing the government to pay insurance claims on the defaulted loans.
"This administration remains committed to holding lenders accountable for their lending practices," HUD Secretary Julian Castro said. "The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA's history. Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practice."
In their suit, the U.S. alleged Wells Fargo hired temporary and inexperienced staff to approve loans in order to increase its volume and bolster their profits.
The bank admitted to only self-reporting 300 problematic loans to the FHA between October 2005 and December 2010, when the company had instead identified more than 2,900 problematic loans during that time period.
Kurt Lofrano, a former Wells Fargo vice president who was also named in the government's complaint, admitted to overseeing a team of bankers who certified bad loans and failing to report them, the Justice Department said.
"This matter is not just a failure by Wells Fargo to comply with federal requirements in FHA's Direct Endorsement Lender program – it's a failure by one of our trusted participants in the FHA program to demonstrate a commitment to integrity and to ordinary Americans who are trying to fulfill their dreams of homeownership," HUD Inspector General David A. Montoya said.