Banking

Settlement prospects reportedly dim in suit between U.S. and Wells Fargo

Lawyers for the U.S. and Wells Fargo & Co. told a judge they doubt they can reach a settlement in a government lawsuit accusing the bank of home-mortgage fraud, a person familiar with the matter said.

The U.S. sued San Francisco-based Wells Fargo in 2012, claiming it made reckless mortgage loans that defaulted and cost a federal insurance program hundreds of millions of dollars. The government said the bank’s misconduct spanned more than a decade while it participated in the Federal Housing Administration’s program.

The suit by Manhattan U.S. Attorney Preet Bharara is part of a larger effort to recoup losses from defaulted mortgages insured by the FHA. It follows cases against lenders including Citigroup Inc. and Deutsche Bank AG.

At a hearing Tuesday, attorneys for both sides told U.S. District Judge Jesse Furman they no longer thought a settlement was within reach, said the person, who wasn’t authorized to speak publicly about the case. Both sides had halted the pre-trial exchange of evidence for four months to engage in settlement talks, according to a court filing.

Tom Goyda, a Wells Fargo spokesman, said the bank will continue defending itself against the allegations.

In 2012, Wells Fargo agreed to pay $5 billion as its share of a settlement of U.S. and state suit probes into abusive foreclosure practices.

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