A U.S. attorney out of Manhattan slapped Wells Fargo (WFC) with a multimillion-dollar lawsuit Tuesday, claiming the bank concealed the condition of Federal Housing Administration-insured toxic loans, costing the government money when the loans eventually defaulted.

Preet Bharara, the U.S. attorney for the Southern District of New York, filed the civil mortgage fraud lawsuit against Wells Fargo this week.

Overall, the suit claims Wells Fargo's concealment of the true condition of 6,320 loans insured by FHA shielded the bank from having to pay the U.S. Housing and Urban Development Department $190 million to indemnify some of the FHA insurance coverage on the toxic loans.

Wells Fargo pushed back against the allegations in a public statement. "Wells Fargo denies the allegations and believes it acted in good faith and in compliance with Federal Housing Administration (FHA) and Department of Housing and Urban Development (HUD) rules," the bank said. "Many of the issues in the lawsuit had been previously addressed with HUD. Wells Fargo is the leading FHA lender and has acted as a prudent and responsible lender with FHA delinquency rates that have been as low as half the industry average."

The case is the second mortgage-related lawsuit filed against a major bank in the past few weeks. The case comes at a time when JPMorgan Chase (JPM) investors are still wary over the potential for litigation losses in the massive RMBS lawsuit filed by New York's AG against JP Morgan Chase.

The U.S. attorney is suing Wells Fargo under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989, claiming the FHA had to pay millions in insurance claims to cover loans that defaulted.

"As the complaint alleges, 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," U.S. Attorney Bharara wrote in a press release. "As also alleged, Wells Fargo’s bonus incentive plan – rewarding employees based on the sheer number of loans approved – was an accelerant to a fire already burning, as quality repeatedly took a back seat to quantity."

The allegations are centered around the Direct Endorsement Lender Program administered by the FHA. Wells Fargo is able to get insurance on loans—covering them in case of default—through the FHA program. However, the U.S. attorney's office claims Wells Fargo recklessly originated and underwrote retail FHA loans that eventually defaulted.

"Wells Fargo failed to conduct adequate quality control and comply with its self-reporting requirements to HUD," the U.S. Attorneys Office said. "In particular, Wells Fargo failed to report to HUD even a single loan with material underwriting violations or fraud until after a HUD lender review in 2005."

Bharaa claims Wells Fargo certified 100,000 retail loans as meeting HUD requirements for FHA insurance. Yet, the suit alleges Wells Fargo knew that underwriters failed to perform the proper due diligence or verify information that would better reflect whether borrowers could actually repay the loans.

"Wells Fargo internally identified 6,558 seriously deficient loans that it was required to self-report, including 3,142 that had been identified as early payment defaults, or loans which were 60 days into default within the first six months," the U.S. attorney's office said. "However, instead of reporting as required, Wells Fargo concealed 6,320 of these improperly certified loans. Wells Fargo also failed to conduct reviews of all early payment defaults, as required, and failed to report loans that had been referred to its fraud risk management department."