More legal woes for Wells Fargo

by Ryan Smith04 Apr 2017
Just days after failing a fair-lending test and agreeing to pay $110 million to settle a lawsuit over its fake-accounts scandal, Wells Fargo received yet another piece of unwelcome news. A federal judge has ruled that the banking giant will have to face lawsuits seeking to hold it responsible for billions of dollars lost by investors in risky mortgage-backed securities.

The plaintiffs in the suits, including funds from BlackRock, Pacific Investment Management, Prudential Financial and TIAA-CREF, claim that Wells Fargo failed as a trustee in 53 trusts in which the mortgage bonds tanked, according to a Reuters report.

US District Judge Katherine Polk Failla’s ruling covered five lawsuits – which together comprise one of the largest remaining pieces of litigation against a bank over the toxic mortgage bonds that helped kick off the 2008 financial crisis. Failla said that the plaintiffs could sue Wells Fargo for breach of contract and conflict of interest, and that they could pursue some claims that the bank breached its fiduciary duty and due care, Reuters reported. She dismissed claims alleging general negligence and the violation of a New York state law regulating mortgage trusts.

Investors said Wells Fargo took “virtually no action” to force lenders to buy back or repair defaulted or poorly underwritten loans backing RMBS, Reuters reported. The plaintiffs alleged that the bank failed to act out of fear that doing so would have exposed its own misconduct. The lawsuits “more than met” the legal standard for letting the claims proceed, Failla said, having produced internal Wells Fargo documents that suggested that the bank did nothing despite knowing that many of the loans were defective.
"It is plaintiffs' contention that such allegations go far beyond many other RMBS trustee complaints, which themselves have been found sufficient to state a claim," Failla wrote, without ruling on the merits. "The court agrees."


Related stories:
Wells Fargo to shell out $110 million to settle fake-accounts suit
Wells Fargo fails fair lending test over ‘egregious’ practices

 

COMMENTS

  • by | 4/5/2017 12:02:05 PM

    Ryan,more bad news for Wells Fargo.It reminds me of that old saying which goes like this,"Oh what a tangled web we weave when we first try to deceive."When we violate any of these three virtues,lie,cheat & steal it will come back to haunt us we will be found out.The moral of the story is don't lie,cheat or steal because you will be found out sooner or later.415 299 0217 cell/direct.

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