U.S., Wells Fargo lawyers doubt they can settle FHA mortgage case

by MPA20 Nov 2014
U.S. and Wells Fargo lawyers told a judge they doubt they can reach a settlement in the two-year lawsuit that allegedly cost the Federal Housing Administration (FHA) hundreds of millions of dollars.

The nation's largest mortgage lender is accused of certifying more than 6,000 FHA-insured mortgages that did not meet origination and underwriting requirements. The lawsuit was filed in October 2012 by the Department of Housing and Urban Development (HUD). In addition to certifying ineligible loans, the FHA also accused the big bank of failing to properly review early payment defaults.

The suit is part of a larger effort to recoup losses from defaulted mortgages insured by the FHA and follows cases against other lenders including Citigroup and Deutsche Bank AG.

At a hearing earlier this week, attorneys for both sides told U.S. District Judge Jesse Furman they no longer thought a settlement was within reach, according to Bloomberg. Both sides had delayed the pre-trial exchange of evidence for four months to engage in settlement talks.

“I’m going to give you two months,” Furman said, according to the court transcript. “You did this at your peril as far as I’m concerned. Had you asked me four months ago for leave to do this, I might have had a different view. But having taken this upon yourselves, you took the chance and you’re going to suffer some consequences.”

A spokesman for Wells Fargo told Bloomberg that the bank will continue to defend itself against the allegations.


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