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Feds continue to probe Wells Fargo despite $1.2bn settlement

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Mortgage Professional America | 25 Feb 2016, 11:08 AM Agree 0
Wells Fargo recently agreed to pay $1.2 billion to settle a federal probe into its mortgage practices. But that apparently wasn't enough to stop every investigation
  • Mike Waling | | 25 Feb 2016, 03:24 PM Agree 0
    So who does the Government (CFPB, DOJ, etc.) thinks pays those fines? Everyone, except the government obviously, they are passed on to the consumer, duh...
    And who benefits from these fines? Well, they certainly don't reimburse the injured party - the consumer. But at least the employees get raises & year end bonuses so we should be happy with that!

  • Ken D | | 25 Feb 2016, 04:45 PM Agree 0
    Government Zombies keep coming for more-
  • | | 25 Feb 2016, 08:42 PM Agree 0
    If there is no penalty then what's to stop them from doing it all again? They are already packaging crappy investments and selling them as solid bets...same crap they did pre-2008 crash. Big banking lobby has so many politicians in its pocket they'll never play by the rules.
  • factchecker2016 | | 26 Feb 2016, 10:24 AM Agree 0

    Wells Fargo's FHA settlement is getting special treatment as the court has closed the case which allows the settlement to be negotiated and finalized without court supervision unlike the nine preceding settlements of FHA false claims suits against big lenders.

    The case docket for the FHA False Claims Act suit against Wells Fargo shows a letter filed on February 3rd by the government and Wells Fargo announcing a settlement agreement in principle. The letter stated:

    "We write to notify the Court that a settlement in principle has been reached that would resolve all claims in this matter, as well as potential civil liability of Wells Fargo Bank, N.A. beyond the scope of this matter. The full agreement is being drafted and remains subject to approval by certain officials in the Department of Justice. Accordingly, all parties respectfully request that the current briefing schedule for their privilege dispute (where briefing was deferred to February 3 per this Court’s January 20 memorandum endorsement of the parties’ January 20 letter to chambers) and summary judgment/Daubert motions (currently due February 25 (Dkt. 313)) be adjourned until further order of the Court and that the parties be ordered to provide a status report to the Court no later than February 17, 2016."

    The Court responded to the letter on the same day with the unusual act of dismissing the action outright thereby abandoning judicial supervision over the settlement agreement. The Court stated:

    "The Court having been advised (Docket No. 314) that all claims asserted herein have been settled in principle, it is ORDERED that the above-entitled action be and is hereby dismissed and discontinued without costs, and without prejudice to the right to reopen the action within thirty days of the date of this Order if the settlement is not consummated. (In the event that the parties seek an extension of that deadline, they shall provide a status report with respect to the settlement.) Any pending motions are moot. All conferences are vacated. The Clerk of Court is directed to terminate Docket No. 314 and to close the case."

    The decision by the Court to dismiss an FHA False Claims Act suit and allow settlement to be negotiated and finalized without court supervision is unprecedented when compared to the settlements of the nine prior FHA false claims actions filed against Bank of
    America/Countrywide, Chase, SunTrust, Deutsche Bank, Citimortgage, Flagstar Bank, Golden First Mortgage, HSBC and Fifth Third Bancorp. All were FHA False Claims Act settlements resulting from lawsuits and ALL were subject to court oversight and approval.

    Considering that the Wells Fargo settlement encompasses the largest number of FHA violations by the largest FHA direct endorsement lender, why is there no federal court overseeing the settlement like the others?

    The pending Wells Fargo settlement agreement is said to cover noncompliant mortgages originated between 2001 and 2010 which includes the conduct of former FHA Commissioner David Stevens when he served as a Wells Fargo corporate executive heading the Bank's national wholesale mortgage lending operations.

    The question that remains that curiously will receive no judicial review is whether $1.2 billion is adequate restitution for the damage inflicted by Wells Fargo and its executives on the FHA Insurance Fund especially considering that any shortage is passed on to FHA borrowers in the form of inflated FHA mortgage insurance premiums in addition to the $1.7 billion kicked in by taxpayers for the FHA bailout.

    If this departure from the longstanding practice of the judiciary overseeing FHA False Claims Act case settlements goes unchecked, the public interest is left unguarded. This is especially the case when the settlement involves the FHA program's biggest violator and the conduct of a former Wells Fargo executive turned FHA Commissioner who more than doubled premiums on FHA borrowers forcing them to pay for the false claims that were wrongly paid from the FHA Insurance Fund to Wells Fargo.

    Will this arrangement go unnoticed and unquestioned? What may have come to light if the Wells Fargo FHA settlement were under court supervision?
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