A U.S. Attorney’s Office lawsuit against Wells Fargo Bank N.A. over mortgage practices includes a claim that the bank did not properly train temporary workers.
Reference to contingents workers makes up only a small part of larger allegations included in the suit announced last week. The suit seeks treble (triple) damages and other penalties for hundreds of millions of dollars in insurance claims for mortgages wrongfully certified by Wells Fargo, according to the complaint. It also seeks other damages.
The complaint says the bank had widespread loan quality problems, reckless underwriting and false loan certifications from May 2001 through January 2003.
One cause of the problem was a significant increase in loan originations, and “to facilitate this substantial increase in [Federal Housing Administration (FHA)] originations, Wells Fargo expanded its staff, including hiring temporary underwriters, to review FHA loans. Many of these employees were not adequately trained with respect to the requirements of the FHA program,” the complaint says.
It adds, “Wells Fargo’s senior management was aware that these employees had not received the in-depth training necessary to properly underwrite these loans and adhere to FHA’s submission requirements.”
The citing of training for temporary workers is only a small piece of the suit. It alleges mortgage practices at the bank resulted in thousands of FHA-insured loans that ultimately defaulted — for which the FHA had to pay out millions.
“As the complaint alleges, yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance,” Manhattan U.S. Attorney Preet Bharara said in a statement. “As also alleged, Wells Fargo’s bonus incentive plan — rewarding employees based on the sheer number of loans approved — was an accelerant to a fire already burning, as quality repeatedly took a back seat to quantity. What’s more, even after concerns were raised internally at the bank, Wells Fargo began self-reporting bad loans in a significant way, as required, only after this office issued a subpoena last year.”