Wells Fargo said Wednesday it is in discussions with the U.S. government to possibly resolve a two-year-old mortgage fraud case.
The government filed the civil lawsuit in 2012 against the San Francisco-based lender, accusing it of “reckless” origination of government-backed home loans.
From 2001 to 2005, Wells certified that more than 100,000 loans met the U.S. Department of Housing and Urban Development’s origination and underwriting requirements, even though the bank knew a large percentage of them were not eligible for federal insurance, the lawsuit said.
When the loans went into default, the Federal Housing Administration was required to pay hundreds of millions of dollars in insurance claims for loans that did not qualify for federal insurance, the government claimed, among other things.
Never miss a local story.
Shortly after the government’s complaint was filed in New York federal court, Wells Fargo filed a motion in Washington, D.C., federal court to be released from the claims but was denied. The bank appealed that decision in 2013 to a federal appeals court, but that attempt also failed.
In the securities filing Wednesday, Wells Fargo said it “is in discussions with the United States about a possible resolution.”
The lender continues to fight other litigation, including a decision last month by federal appeals court in San Francisco in an overdraft fee case. The court said Wells Fargo must pay customers $203 million after it was accused of manipulating debit-card transactions to increase the fees.
In the securities filing Wednesday, Wells Fargo says it is “considering its options” in that case.
The bank also said in the securities filing that it has lowered its estimate for how much its legal costs could exceed the amount it has set aside to cover those expenses.
Wells said it could spend as much as $950 million above its reserves based on estimates at the end of September. The figure is a decrease from $1.2 billion at the end of June.
That decrease came as the bank resolved some of its largest outstanding legal issues in the quarter, including two Maryland class-action cases over mortgage practices.