Bank Argues Government's False Claims Act Case Violates National Servicing Settlement

Mortgage Origination False Claims Act / FIRREA

On November 1, one of the five banks that entered into a comprehensive mortgage servicing settlement earlier this year with the federal government and 49 state attorneys general invoked that agreement in defense of claims recently filed against it by the federal government. Motion of Defendant Wells Fargo Bank, N.A. to Enforce Consent Judgment, United States v. Bank of America Corp., No. 1:12-cv-00361 (D.D.C. Nov. 1, 2012). Wells Fargo’s motion responds to a complaint filed in the Southern District of New York in which the DOJ and HUD allege that the bank falsely certified loans under the FHA’s Direct Endorsement Lender Program in violation of the False Claims Act (FCA) and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA). In response, the bank has asked the court overseeing the national servicer settlement to enforce the Consent Judgment the bank entered, which the bank notes includes a comprehensive release for certain liability with respect to its alleged FHA mortgage lending conduct. The bank argues that the release specifically releases liability arising under the FCA and FIRREA for its alleged FHA-certification conduct. The bank seeks declaratory relief with respect to its rights under the servicing settlement, as well as an order enjoining the federal government from pursuing its case in New York. Wells Fargo’s motion indicates that the government plans to oppose the motion.