Wells Fargo agrees to $2B fine to settle financial crisis-era allegations

Federal officials allege Wells Fargo knowingly misrepresented the quality of loans tied to mortgage-backed securities

TRD NATIONAL /
Aug.August 01, 2018 05:30 PM

Timothy Sloan CEO of Wells Fargo

Wells Fargo has agreed to pay a $2.09 billion penalty for allegedly misrepresenting the quality of loans used for mortgage-backed securities between 2005 and 2007.

Federal officials allege that the bank loosened borrowers’ income requirements on some of its loans in a move to ramp up its subprime mortgage lending.

As a result, the U.S. Justice Department said investors suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo.

Federal officials allege that some of Wells Fargo’s loans had a wide variance between what borrowers stated as their income and their actual income.

Officials further allege that despite knowing that borrowers’ incomes were misrepresented, Wells Fargo failed to disclose this information to investors. Instead it reported false ratios to investors on the loans it sold.

San Francisco-based Wells Fargo did not admit to any wrongdoing as part of the settlement.

“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,” said Wells Fargo CEO Tim Sloan in a statement.

The Justice Department also alleged that Wells Fargo took steps to insulate itself from the risks of these toxic loans by screening out many of these loans from its own loan portfolio.

The penalty is the latest in a series of scandals that have plagued one of the country’s largest banks. Just a few months ago in April, Wells Fargo paid about $1 billion to settle alleged sales abuses of auto and mortgage products.


Related Articles

arrow_forward_ios
Masoud Shojaee and a rendering of Shoma Village 

Shoma Group scores $67M loan for mixed-use Hialeah project

Shoma Group scores $67M loan for mixed-use Hialeah project
Photo illustration of Ron DeSantis (Getty, iStock)

DeSantis announces $250M rental, mortgage assistance fund

DeSantis announces $250M rental, mortgage assistance fund
Housing Trust Group CEO and president Matt Rieger and Hudson Village renderings

HTG scores financing for Hollywood affordable housing project

HTG scores financing for Hollywood affordable housing project
Gov. Ron DeSantis (Credit: Joe Raedle/Getty Images)

Florida extends freeze on evictions and foreclosures to July

Florida extends freeze on evictions and foreclosures to July
4238-4276 Northwest 7th Street in Miami, Avison Young’s Michael Fay, John Crotty, David Duckworth, Brian de la Fé, Emily Brais and Berkley Bloodworth

Mixed-use Le Jeune Road dev site heads to market for $17M

Mixed-use Le Jeune Road dev site heads to market for $17M
 Rendering of Father Marquess-Barry Apartments with Matt Rieger

HTG scores financing for senior affordable housing in Overtown

HTG scores financing for senior affordable housing in Overtown
Governor Ron DeSantis (Credit: Eva Marie Uzcategui/Getty Images)

Florida governor extends freeze on evictions, foreclosures

Florida governor extends freeze on evictions, foreclosures
Vlad Doronin, Len Blavatnik, and 3425 Collins Avenue (Credit: Google Maps, Gesi Schilling, and Mark Neyman / GPO)

Developer of Aman-branded towers in Miami Beach scores $35M loan

Developer of Aman-branded towers in Miami Beach scores $35M loan
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...