[ by Melanie Gretchen ]

Wells Fargo lied about United States prosecutors sued Wells Fargo on Tuesday, accusing it of lying about the quality of the mortgages it handled under a federal housing program, according to U.S. prosecutors.  This is the latest action in a series of lawsuits related to banks' lending practices during the housing boom.

The lawsuit, filed in Federal District Court in Manhattan, alleges:

• Wells Fargo, the country's largest originator of home loans, defrauded the government for more than a decade
• The bank recklessly issued mortgages and then made false certifications about their condition to the Federal Housing Administration (FHA), a government agency that insured them
• The problematic loans were not eligible for the government insurance, and when they soured, the FHA was obligated to cover the losses. The Justice Department is seeking hundreds of millions of dollars in damages.
• The complaint depicts a mortgage factory inside Wells Fargo that was singularly focused on increasing the bank's loan volumes - and profits - while ignoring the quality of the loans.
• Wells Fargo knew about the vast number of deficient loans but concealed them from the FHA

"Yet another major bank has engaged in a longstanding and reckless trifecta of deficient training, deficient underwriting and deficient disclosure, all while relying on the convenient backstop of government insurance." -- Preet S. Bharara, the United States attorney in Manhattan, whose office filed the lawsuit, in a statement.

In its defense ... Wells Fargo denied the accusations, saying that it had acted in good faith and in compliance with the FHA program, in a statement:

"Wells Fargo is the leading F.H.A. lender and has acted as a prudent and responsible lender, with F.H.A. delinquency rates that have been as low as half the industry average.  The bank will present facts to vigorously defend itself against this action."

Past lawsuits by the government against large banks, related to their lending practices, include:

• Deutsche Bank, which paid more than $200 million to resolve civil fraud charges
• Citigroup's Citimortgage unit, which settled claims for $158 million
• Bank of America, in a settlement connected to its Countrywide Financial business, for $1 billion

For further details, go to [Dealbook, 10/9/12].