Judge Rejects Wells Fargo’s Bid to Have Case Dismissed

Judge Rejects Wells Fargo’s Bid to Have Case Dismissed

02/13/2013 BY: TORY BARRINGER

The federal judge who approved last year’s National Mortgage Settlement between the government and the five largest servicers turned down Wells Fargo’s claim that a federal lawsuit against the bank violates settlement terms.

District Judge Rosemary Collyer wrote in her opinion that Wells Fargo took “a leap of logic” in its interpretation of several settlement provisions that would bar the government from bringing certain claims against the bank.

The U.S. attorney for the Southern District of New York brought a case against Wells Fargo in October 2012, claiming the bank falsely certified the credit and underwriting quality of loans to be insured by the Federal Housing Administration (FHA). According to the government’s complaint, this behavior went on for more than 10 years, costing HUD hundreds of millions of dollars.

Wells Fargo argued against the litigation in November, saying the bank’s participation in the National Mortgage Settlement “wiped the slate clean for Wells Fargo” in terms of legal liability for its FHA portfolio except in “carefully crafted, narrow circumstances.”

In her opinion, Collyer noted that Wells Fargo’s reasoning for dismissal stems from a provision in the settlement that the government cannot sue the bank for claims of fraudulent annual certifications concerning its compliance with HUD/FHA requirements.

Collyer, however, argued that the bank’s interpretation of the settlement clauses doesn’t match the actual language used.

“The plain language of the Release governs, and it does not have the meaning ascribed to it by Wells Fargo,” Collyer wrote.

While the judge ruled that Wells Fargo is not protected from claims because of the settlement, she did not specifically address the New York case, instead leaving the matter to the court for the Southern District of New York.

In a statement, Wells Fargo said it “respectfully disagrees with the Court’s interpretation of the scope of the release, and is considering its options regarding appeal.” The bank also noted that Collyer’s decision did not determine if the pending complaint contains any barred claims, saying it “[looks] forward to the resolution of that issue in the Southern District of New York upon the completion of briefing in that matter.”

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