WELL FARGO TO PAY 860$ MILLION AS PENALTY FOR SELLING HOME LOAN PACKAGES TO GOVT CONTROLLED MORTGAGE GIANT FREDDIE MAC: BUT IS IT ENOUGH TO STOP BANKING FRAUD?

 

Wells Fargo, one of America's largest banks, has been ordered to repay 869$ million to Freddie Mac for selling the govt. controlled mortgage administrator loan packages that were fraudulent, or obtained fraudulently.

Th California based bank agreed to pay the sum to defray the huge liabilities created by the fraudulent mortgages to Freddie Mac.  

Citigroup too, agreed to repay Freddie Mac 395$ million for similar reasons.  

The issue at hand, is the widespread fraud and misrepresentation carried out during the sale of mortgages or mortgage packages to Freddie Mac.  The mortgages sold to Freddie Mac, under Federal Law, must have some guarantees that protect the agency from acquiring mortgages that can default.  Some of these guarantees stem from the due diligence the banks must exercise in requiring applicants to disclose their true ability to repay the mortgage and the bank's own duty to verify the veracity of the disclosures made by the applicants.  

Everyone knows by now, that the major banks and some smaller ones, were all guilty of obtaining mortgages by creating false paperwork, accepting paperwork in which there was no disclosure of the applicant's ability to repay the mortgage and so forth.  The mortgages were then bundled and resold as investment packages, securities and derivatives, causing the collapse of the market in 2008. 

Although no one has to date ended up in court to face jail time or any similar punitive measures, this is the first step to bring at least a measure or accountability to those banks that so easily broke every banking rule when obtaining mortgages.  

Banks now live in an era where money is no longer made the traditional way.  Today banks rely on fees, whether those fees are tacked onto services for accounts, or credit cards, or refinancing and mortgage applications. Without a proper set of legislation to curb the ease with which existing regulations are overlooked or disregarded, there is no guarantee that banks will not repeat the actions that led to the last economic meltdown.  In that sense, not much has changed.  

Partial source : France 24/ 10.1.13