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Wells Fargo Bank acknowledges improper reporting for FHA insurance

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Wells Fargo Bank acknowledges improper reporting for FHA insurance

As previously agreed upon in principle, unit reached anagreement with U.S. authorities, including the Justice Department, to settlecivil mortgage fraud claims against the bank and an executive, Kurt Lofrano,over the bank's participation in the Federal Housing Administration's directendorsement lender program.

In addition to agreeing to pay $1.2 billion, Wells FargoBank admitted, acknowledged and accepted responsibility for certifying to theDepartment of Housing and Urban Development that certain residential homemortgage loans were eligible for FHA insurance when in fact they were not, fromMay 2001 through December 2008. That resulted in the U.S. government having topay FHA insurance claims when some of those loans defaulted.

The agreement resolves the United States' civil claims inits lawsuit in the Southern District of New York, as well as a probe conductedby the U.S. Attorney's Office for the Southern District of New York regardingWells Fargo Bank's FHA origination and underwriting practices subsequent to theclaims in its lawsuit and an investigation conducted by the U.S. Attorney'sOffice for the Northern District of California into whether American MortgageNetwork LLC, a mortgage lender acquired by Wells Fargo in 2009, falselycertified and submitted ineligible residential mortgage loans for FHA insurance.

The settlement is "the largest recovery for loanorigination violations in FHA's history," HUD Secretary Julián Castro saidin the DOJ news release dated April 8.

In a company statement, Wells Fargo & Co. noted it hadfully accrued for the costs of the settlement as of Dec. 31, 2015.

"Today's court filing details a previously announcedagreement in principle that resolves not only the pending lawsuit filed by theU.S. Attorney for the Southern District of New York, but also a number of otherpotential claims going back as far as 15 years in some cases," saidFranklin Codel, president of Wells Fargo Home Lending, in the statement.

Jesse Furman, U.S. district judge for the Southern Districtof New York, approved the settlement on April 8.