Wells Fargo Settles With U.S. Government Over Loans to Veterans
(Bloomberg) -- Wells Fargo & Co. settled an 11-year-old lawsuit with the U.S. government that claimed the lender overcharged veterans under a federal mortgage-refinancing program.
The bank will pay $108 million to the government to resolve allegations that some loans it made under a U.S. Department of Veterans Affairs program shouldn’t have been eligible for guarantees by the agency, the San Francisco-based firm said Friday in a statement. Wells Fargo said it denies the allegations in the lawsuit, which was originally filed in 2006 by two mortgage brokers.
Wells Fargo and other banks were accused of defrauding veterans and the U.S. out of millions of dollars under a Veterans Administration loan refinancing program. The lenders allegedly overcharged veterans and concealed their conduct from the government to obtain guarantees for the loans, according to filings. Most of the banks have settled the lawsuits.
Wells Fargo has been struggling with scandals in its consumer bank over the past 11 months, beginning with revelations in September that its employees may have created millions of fake accounts without customers’ knowledge. In July, it said it may have pushed thousands of car buyers into loan defaults and repossessions by charging them for unwanted insurance.
Six years ago, Wells Fargo settled a class-action lawsuit brought in Georgia that alleged misconduct in refinancing loans backed by the Veterans Administration. As part of the settlement, the bank compensated some veterans who refinanced VA loans between 2004 and 2010, according to Friday’s statement.
Other competitors have also run into legal problems making loans to veterans. In 2011, JPMorgan Chase & Co. agreed to pay $27 million in cash to settle allegations it overcharged military personnel on their mortgages. The bank also slashed interest rates on those loans and returned homes that were wrongly foreclosed upon. About 6,000 service members were covered under the class-action lawsuit.
Wells Fargo said Friday it had already set aside money to cover the settlement costs. The firm said it is the largest provider of VA-guaranteed loans, having funded about 23 percent of those issued since 2001.