Sunday, October 14, 2012

Wells sued...and will walk away

Wells Fargo, the nation's largest mortgage lender, denies the allegations, and says it will defend itself vigorously.

Wells Fargo isn't the only big bank accused of such things. This was more or less America's mortgage-making system for years. The damage it did likely brought down your home value, too.

The government alleges Wells Fargo took shortcuts on thousands of mortgages fromMay 2001 through October 2005 and illegally foisted them upon the FHA. It also alleges the bank failed to report more than 6,000 loans that went bad between 2002 and 2010—which may be one reason why it took so long to file this lawsuit.

America's economic decline is largely due to armies of negligent people who were paid commissions to push paper. If you believe what's alleged in countless lawsuits, fraud was commonplace among sellers, buyers, real-estate agents, appraisers, title companies and lenders.

It is a lender's responsibility to properly underwrite a loan to be sure fraud does not occur, let alone run rampant. But when everyone is cheating, and government begs to take the baggage, a lender thinks more about the money than hiring and training bright, honest people to straighten it out.

"Yet another major bank has engaged in a long-standing and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance," Mr. Bharara said in a news release.

I predict this case will go the way of so many others: Wells Fargo will pay a huge settlement, possibly without any admission of guilt, long before a trial date beeps on any lawyer's smartphone.

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