Wells Fargo Sued Over Mortgage Investments
STEVE INSKEEP, HOST:
NPR's business news starts with another bank sued.
Wells Fargo has become the second major American bank to be sued over its conduct during the housing boom. The U.S. Attorney's office in New York alleges that Wells Fargo approved hundreds of millions of dollars in bad housing loans during the 10-year period leading up to the financial crisis.
NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: U.S. officials said that Wells Fargo approved 100,000 federally guaranteed mortgages. The suit says that bank was supposed to make sure the borrowers could pay the loans it issued. But it says as many as half of the mortgages in some months allegedly had not been underwritten properly. Part of the problem, the suit says, is that the bank hired temporary workers to process the loans and the compensation was tied to the number of loans the employees processed.
The bank was supposed to have a quality control program to oversee lending. But the suit says even when concerns were raised, internally, Wells Fargo did nothing to address them until it was too late. The suit seeks hundreds of millions of dollars in damages on behalf of the federal agency that guaranteed the mortgages.
This is the second major U.S. bank to be sued this month over bad mortgage investments. Last week, the New York attorney general sued JPMorgan Chase over bad mortgage securities packaged and sold by Bear Sterns, which the bank bought in 2008.
Wells Fargo insisted, yesterday, it had complied with all federal regulations and it said it would vigorously contest the charges.
Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.