Wells Fargo Bank Just Got Downgraded
Dr. John E. Warren | 4/19/2017, 1:28 p.m.
In recent years, Wells Fargo has also received fines for misconduct in their mortgage lending division.
On April 8, 2016, the U.S. Department of Justice issued a press release citing Wells Fargo's agreement to pay $1.2 billion for improper mortgage lending practices.
According to the press release, Wells Fargo, “admitted, acknowledged and accepted responsibility for, among other things, certifying to the Department of Housing and Urban Development (HUD), during the period from May 2001 through December 2008, that certain residential home mortgage loans were eligible for FHA insurance when in fact they were not, resulting in the Government having to pay FHA insurance claims when some of those loans defaulted.”
The settlement was approved by the U.S. District Court for the Southern District of New York on April 8, 2016.
In the Justice Department’s press release about Wells Fargo’s $1.2 billion settlement, then-HUD Secretary Julián Castro said that the Obama Administration was committed to holding lenders accountable for their lending practices.
“The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations in FHA’s history,” said Castro. “Yet, this monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.”
In the same press release, then-U.S. Attorney Preet Bharara for the Southern District of New York said that Wells Fargo took advantage of the FHA mortgage insurance program, that was designed to help millions of Americans realize the dream of home ownership, and wrote thousands and thousands of faulty loans.
“Driven to maximize profits, Wells Fargo employed shoddy underwriting practices to drive up loan volume, at the expense of loan quality,” Bharara said in the Justice Department’s statement.
Bharara continued: “Even though Wells Fargo identified through internal quality assurance reviews thousands of problematic loans, the bank decided not to report them to HUD. As a result, while Wells Fargo enjoyed huge profits from its FHA loan business, the government was left holding the bag when the bad loans went bust.”
MSN Money reported that "shares of Wells Fargo gained only 2.9 percent in the last two years, significantly underperforming” the 22.8 percent growth expected by some analysts.
According to MSN Money, “the primary reason for this underperformance is the substantial plunge in shares following the September lawsuit settlement.”
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Dr. John E. Warren is the publisher of the San Diego Voice and Viewpoint and a contributing writer for the NNPA Newswire specializing in intergovernmental affairs.