FHA’s ability to sue Wells Fargo for
“reckless origination and underwriting practices, that caused FHA
to experience hundreds of millions of dollars in federal insurance
payouts” has been upheld by the U.S. Court of Appeals. Wells Fargo
had earlier entered into a 5 bank “limited settlement” of
approximately $5b with FHA on another FHA suit and maintained that
the settlement agreement in that case barred FHA from bringing
additional lawsuits against the San Francisco based mega bank. 3 of
the other 4 banks settled similar claims for about $2b.
So, while a multi-billion dollar
settlement to FHA is eminent, it is not going to be anywhere near the
hundreds of billions of dollars that FHA maintains it lost. It will
be interesting, however, to see how much more settlement dollars it
will cost Wells to put up this fight.
