The Corrupting Influence of Federal Housing Policy

The U.S. government recently filed suit against Wells Fargo, the nation's largest mortgage lender, for failing to check or otherwise misrepresenting the creditworthiness of borrowers to whom the bank issued mortgages guaranteed by the Federal Housing Authority. Manhattan's U.S. Attorney, Preet Bharara, alleges a "long-standing practice of reckless underwriting and fraudulent loan certification for thousands of FHA-insured loans that ultimately defaulted." ... The government alleges Wells Fargo took shortcuts on thousands of mortgages from May 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. The collapse of the housing market caused taxpayers to fork over billions of dollars to bail out private companies holding, purchasing, and selling bad mortgages and investments, debt, and insurance based on those...(Read Full Post)