On October 9, the United States Attorney for the Southern District of New York filed suit against Wells Fargo Bank, N.A. in the United States District Court for the Southern District of New York. The civil suit seeks damages, including treble damages where available, and civil penalties for alleged violations of the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, breach of fiduciary duty, gross negligence, negligence, unjust enrichment, and payment under mistake in fact. The Government’s complaint alleges that Wells Fargo, a participant in the Federal Housing Administration’s mortgage lending insurance program, failed to report over 6,000 mortgage loans that were in fact ineligible for FHA insurance. As a result of Wells Fargo’s alleged misconduct, the Government allegedly paid hundreds of millions of dollars in connection with insurance claims made on these loans. The alleged defects in connection with Wells Fargo’s origination process – that violations of stated mortgage lending guidelines resulted in poor quality loans – are similar to the allegations that underlie many RMBS investor actions. Complaint.
