The article above does a great job of explaining what occurs in the event of a default on an FHA loan. Basically, FHA loans are insured by the government. In this instance above, Wells was allegedly submitting false losses on these insured loans. Rather than admit guilt, Wells reached a settlement of just over 4 million. A lender can submit a request for repayment on a loss on a government insured loan, such as an FHA loan. (under strict stipulations) In this instance, Wells was being accused of simply lying. The true value of the article above in my opinion is the detailing of the continued problem with lenders and short sales.