NEW YORK (AP) — The federal government has sued Wells Fargo Bank (NYSE:WFC) in New York, blaming the nation's largest originator of home mortgages for thousands of loan defaults over the last decade.
A civil mortgage fraud lawsuit filed in U.S. District Court in Manhattan on Tuesday seeks to recover hundreds of millions of dollars that the Federal Housing Administration, which insured the loans, had to pay out after borrowers defaulted.
The lawsuit charges San Francisco-based Wells Fargo with falsely certifying that its loans met the standards necessary to be eligible for government insurance. U.S. Attorney Preet Bharara says the bank's plan to reward employees for the number of loans they approved "was an accelerant to a fire already burning."
This marks the fifth lawsuit that the government has brought against major lenders over mortgage practices.
Wells Fargo & Co. has denied the allegations and is promising a vigorous defense.
The Motley Fool owns shares of Wells Fargo & Company and has the following options: short OCT 2012 $33.00 puts on Wells Fargo & Company and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.