Boston, MA 06/13/2014 (wallstreetpr) – Wells Fargo & Co (NYSE:WFC), recently lost its appeal filed in the United States District court of Appeals, against the Federal Housing Administration, which accused fraud by one of the biggest mortgage lenders of the U.S. This is a positive win for the U.S. government in its cases relating to the financial and housing crisis.
Wells Fargo had made an appeal claiming that as it had paid $5 billion settlement amount by participating in the National Mortgage Settlement, it was not liable for any legal suits on past mortgages.
A civil suit which was filed against Wells Fargo & Co (NYSE:WFC) in 2012 accused the mortgage lender of concealing various conditions of loans given which were toxic in nature and which eventually cost the government due to mass defaults as these loans were insured by the Federal Housing Administration, better known as FHA.
At first, it was the U.S. district court for Columbia district that denied Wells Fargo’s case saying that the National Mortgage Settlement (NMS) ‘expressly preserved’ the U.S. right to pursue legal suits on independent loan contracts.
Following the verdict, the lender had approached the District Court of Appeals, but got its appeal dismissed, as the court ruled that the terms mentioned in the NMS do not prevent any further action on payment of the settlement amount. As a result, the government can take legal action any violations with respect to issuing of mortgage loans.
Meanwhile, the Court of Appeals had also noted that Wells Fargo & Co (NYSE:WFC) can seek relief from paying claims in those cases were the claim has already been paid under the NMS.
The National Mortgage Settlement in 2012 was mainly for violations of laws regarding the issuance of loans and their underwriting procedures. A total of 5 large banks had participated in the NMS, with Wells Fargo & Co (NYSE:WFC) contributing $5 billion out of the total $25 billion NMS settlement.
Following the NMS, the Federal Housing Administration had taken additional action against 4 of the lenders namely Citigroup Inc. (NYSE:C), Wells Fargo, Bank of America Corp. (NYSE:BAC) and JP Morgan Chase & Co. (NYSE:JPM).