(Reuters) - Wells Fargo & Co said on Wednesday it had agreed to pay $1.2 billion to settle claims that it engaged in mortgage fraud, resolving a major U.S. lawsuit brought in the wake of the 2008 financial crisis.
The settlement resolves a lawsuit filed in federal court in Manhattan in 2012 accusing Wells Fargo, the country’s largest mortgage lender, of engaging in misconduct in originating and underwriting government-insured mortgages.
The lawsuit, brought by Manhattan U.S. Attorney Preet Bharara’s office, was among a series of cases against banks following the financial crisis stemming from mortgages insured through a program by the Federal Housing Administration (FHA).
Several lenders including Bank of America Corp, Citigroup Inc and Deutsche Bank AG have resolved similar lawsuits over FHA-insured loans, paying hundreds of millions of dollars in the process.
Wells Fargo said the settlement was reached on Feb. 1 and would also resolve claims by the U.S. Attorney's Office in San Francisco and the U.S. Department of Housing and Urban Development. (1.usa.gov/1JXUnNe)
The 2012 lawsuit accused Wells Fargo of engaging in a “reckless” mortgage origination and underwriting practices from 2001 to 2005.
It also said Wells Fargo had failed to report more than 6,000 loans from 2002 to 2010 that did not meet requirements for insurance under the Federal Housing Administration and failed to properly review early payment defaults.
Beyond naming Wells Fargo as a defendant, the civil lawsuit named Kurt Lofrano, a vice president at the bank accused of playing a “critical role” in not reporting the loans to government officials.
It was not clear if the settlement applied to Lofrano. But a letter filed later on Wednesday by lawyers who work with Bharara said the deal resolves “all claims in this matter.”
The letter said the full agreement was still being drafted and needed to be approved by Justice Department officials. The parties plan to provide a status report to the court by Feb. 17, the letter said.
A spokesman for Bharara declined comment.
The case is U.S. v. Wells Fargo Bank NA, U.S. District Court, Southern District of New York, No. 12-07527.
Reporting by Nate Raymond in New York and Sruthi Shankar in Bengaluru; Editing by Don Sebastian and Tom Brown