The U.S. sued the San Francisco-based bank last year, alleging it made reckless loans that caused losses for a federal insurance program when borrowers defaulted and seeking hundreds of millions of dollars in damages.
U.S. District Judge Jesse M. Furman in New York today ruled that while the federal government’s statutory claims against the lender could stand, any legal injury claims based on events that transpired before June 2009 were too late to be actionable. He also threw out mistake-of-fact and unjust enrichment claims.
“Those arising before 2004 are untimely and those arising after are barred because the United States Department of Housing and Urban Development was aware of Wells Fargo’s misconduct at the time,” Furman wrote.
The bank had sought dismissal of the government’s entire case.
“We are disappointed with the court’s ruling, but we look forward to presenting facts to vigorously defend against this action,” Mary Eshet, a spokeswoman for the lender, said in an emailed statement. “Wells Fargo denies the allegations and believes it acted in good faith and in compliance with Federal Housing Administration and Department of Housing and Urban Development rules.”
The lawsuit is part of a larger effort by the U.S. government to recoup losses from defaulted mortgages insured by the FHA.
Wells Fargo in April 2012 agreed to pay $5 billion as its share of a settlement of U.S. government abusive foreclosure practice claims.
The reckless lending case, arising out of the bank’s participation in an FHA program enabling it to certify loans for government insurance without prior agency approval, was filed six months later.
In February, the federal judge in Washington who approved the April 2012 foreclosure accord rejected Wells Fargo’s argument that the agreement barred the October lawsuit.
“The court finds that the release is clear and unambiguous, as evidenced by its plain language,” U.S. District Judge Rosemary Collyer said then. “The plain language of the release governs, and it does not have the meaning ascribed to it by Wells Fargo.”