A three-judge panel from the United States District Court of Appeals for the District of Columbia denied an appeal from Wells Fargo (WFC) in a lawsuit brought against the bank by the Federal Housing Administration.

The civil suit, originally filed in New York in October 2012, alleged that Wells Fargo concealed the condition of FHA-insured toxic loans, which cost the government money when the loans eventually defaulted.

Wells Fargo claimed that its participation in the National Mortgage Settlement precluded any additional legal action from being taken against the bank over its mortgage practices.

The U.S. District Court for the District of Columbia initially denied Wells Fargo’s claim, saying the NMS “expressly preserved the United States’ ability to pursue other legal claims based on the independent loan origination and servicing conduct that underlay those certifications.”

Wells Fargo appealed the lower court’s decision to the District Court of Appeals, which, in its ruling Tuesday, agreed with the lower court’s ruling on the matter.

The appeals court ruling states that the language of the NMS does not prevent further legal action. “Wells Fargo’s efforts to escape those contractual limitations fail,” the appeals court ruling states.

Tuesday’s ruling lays out specific reasons why Wells Fargo’s appeal has been denied. Among those reasons is that the NMS “expressly preserved the United States’ right to pursue claims ‘for conduct with respect to the insurance of residential mortgage loans that violates any laws, regulations or other HUD-FHA requirements applicable to the insurance of residential mortgage loans by HUD.’”

Tuesday’s ruling does provide a small silver lining for Wells Fargo. “Wells Fargo is correct that some portions of the New York complaint tread on the verge of the released claims, referencing false annual certifications explicitly,” the ruling states. The ruling also states that if the government’s prosecution does veer into claims that were already released by the NMS, “Wells Fargo may seek appropriate belief.”

The full ruling from the U.S. Appeals Court can be read here

This is just the latest legal issue for the country's largest mortgage servicer. In April, a New York judge ruled that the bank could not keep its "Home Mortgage Foreclosure Attorney Procedure Manual" out of a lawsuit in federal court. In that case, a homeowner alleges that Wells Fargo used the Wells Fargo manual to falsely create evidence of ownership, known as the note, and on how to proceed with a foreclosure when crucial documents are missing.

The Wells Fargo manual – a copy of which can be downloaded or viewed here – provides step-by-step guides for Wells Fargo foreclosure attorneys and the “Default Docs Team.”