Wells Fargo is hit with a $2 billion fine in mortgage settlement
Wells Fargo & Co. has agreed to pay $2.09 billion for actions that allegedly contributed to the 2008 financial crisis, the Department of Justice said Wednesday.
Lucinda Shen of Fortune had the story:
That new penalty comes on top of a $1.2 billion fine Wells Fargo agreed to pay in April 2016 in relation to the Financial Crisis. The Department of Justice alleged at the time that Wells had deceived the Federal Housing Administration into insuring risky mortgages that were ineligible for federal support between the years of 2001 and 2008.
Wells Fargo has paid several fines upward of a billion in the past two years, with the succession of scandals starting in 2016, when regulators said the bank had opened millions of fake accounts—resulting in millions of unwarranted fees levied on consumers.
On Wednesday, the DoJ alleged that Wells Fargo had issued residential mortgages to creditors they knew to have overstated their income, or failed to meet the bank’s internal risk threshold.
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” said Alex Tse, acting U.S. attorney for the Northern District of California in a statement. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”
Julia Horowitz of CNNMoney.com reported that the bank wants to put the issue behind it:
In a statement, Wells Fargo said it “remains focused on [its] important role as one of the nation’s leading providers of mortgage financing.”
“We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago,” Wells Fargo CEO Tim Sloan said.
The bank pointed out that the Justice Department has previously reached settlement agreements with other banks over similar issues, and that “importantly, there were no claims that individual customers were harmed as a result of the alleged conduct.”
The government alleges that between 2005 and 2007, Wells Fargo knew many of its home loans were based on misstated income details and misrepresented their quality.
Sloan also added that Wells Fargo still remains focused on its “important role as one of the nation’s leading providers of mortgage financing and on our commitment to expanding sustainable homeownership opportunities for our customers” despite the news.
However, the long-anticipated fine comes as the bank continues to grapple with a scandal involving fake customer accounts that erupted in 2016 as well as other scandals and government investigations over the years.
What’s more, in April, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency fined the bank $1 billion over claims of improper mortgage and auto-lending practices.