The same day that trial began in the Justice Dept.’s lawsuit against Bank of America, the DOJ had another victory in a similar suit filed last year against Wells Fargo, as the bank failed this morning in its attempt to have the suit dismissed.

The lawsuit, filed last October in a U.S. District Court in Manhattan, accuses Wells Fargo — the country’s largest mortgage lender — of lying to the Federal Housing Administration about the quality of hundreds of millions of dollars worth of FHA-insured loans.

Had the Dept. of Housing and Urban Development known about the toxic nature of these loans, claims the suit, it would not have qualified them for FHA insurance. Thus, when those loans went south, it would not have been on the hook for huge amounts of money.

Like the original lawsuit against BofA, the government is alleging violations of the False Claims Act, an old law that involves making fraudulent claims of payment to a government official, and the more recently enacted Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) that involves the making of false statements to a federally insured financial institution. If successful in proving its case under the False Claims Act, the DOJ can seek triple the damages.

It wasn’t a complete failure for Wells Fargo, as the court ruled that the DOJ was too late in bringing claims of unjust enrichment and dismissed other 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,” wrote the judge.

“We are disappointed with the court’s ruling, but we look forward to presenting facts to vigorously defend against this action,” a bank rep tells Bloomberg. “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.”

Wells Fargo fails to win dismissal of U.S. mortgage fraud case [Reuters]

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