Wells Fargo, Goldman Sachs Settle Mortgage Lawsuits

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Bank buildings, representing Citigroup Accused of Spoofing

It has been quite a few months since we have heard anything big about the continuing pursuit of mortgage fraud lawsuits. However, that silence changed last week with the announcement on Friday of a $1.2 billion settlement by Wells Fargo. It was followed today by a $5 billion settlement agreement with Goldman Sachs. The Justice Department settlements concluded enforcement actions under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and other legal theories. It also puts the U.S. Government and financial industry one step closer to putting the financial crisis created by bad mortgages behind it.

Although it didn’t reach nearly as high as the Bank of America fine of over $16 billion, the Goldman Sachs agreement to pay $5.06 billion to settle allegations it improperly sold mortgage-backed securities to investors is only . The civil penalty under FIRREA was roughly $2.385 billion of the total settlement. The bank also agreed to provide $1.8 billion in relief to homeowners, affected communities and others.

The Wells Fargo settlement of $1.2 billion is the largest recovery for loan origination violations in the history of the Federal Housing Administration (FHA). The lawsuit brought claims under the False Claims Act, FIRREA, and common-law fraud theories. A SDNY District Court Judge approved the settlement on Friday.

There was no mention of mortgage whistleblowers in either case. Although there were four whistleblowers in the case against Bank of American and Countrywide, there have been relatively few mentions of insiders providing information to the government for a reward in other cases. However, it is possible that the United States has paid small rewards to individuals providing tips through FIRREA and simply hasn’t mentioned it because the size of the settlement dwarfs the maximum award under the law: $1.6 million. For those interested in additional information about the cap, look to the Congressional bill referred to as the WARN Act which proposes to lift the limit of $1.6 million.

As we approach the decade mark on some of the conduct at issue, there probably won’t be too many fresh investigations launched. The Royal Bank of Scotland and Deutsche Bank remain under investigation, according to a Bloomberg news article. For additional information about the government’s pursuit of mortgage fraud, contact one of our False Claims Act attorneys.