- Personal Finance
Wells Fargo Bank and Bad Mortgages Sued
The Federal government is now going after Wells Fargo bank for reckless and bad lending practices involving home mortgages, which forced the US government to pay for them. Basically, Wells Fargo bilked the FHA home loans that cater to low income and first time home buyers. In Feb., Bank America admitted guilt to similar charges and was force to pay one billion dollars in damages.
The suit against Wells Fargo alleges that they have been conducting these bad loans and other bad practices for the past 10 years. During this time, the bank claimed that over 100,000 home loans met the FHA guidelines for origination when in fact only half did. The bank has been sued two other times this year. In one of those cases, WFB agreed to pay $175 million for discrimination against black and Hispanice borrowers. In the other case, WFB agreed to pay $25 billion in foreclosure abuses.
FHA loans have boomed since 2008 because they require low down payments of only 3.5% for a home, but because many are low income earners, defaults are equally booming. The Federal government is suing the big banks and winning in an effort to keep FHA afloat and avoid having to loan the agency $700 million from the U.S. Treasury, which would have been the first time in 78 years.