The bank merry-go-round continues, and now it’s Wells Fargo’s turn to pay big penalties to Fannie Mae for mortgage-related claims stemming from the 2008 financial crisis.
On Dec. 30, Wells Fargo agreed to a $591 million deal with Fannie Mae to settle allegations that the company knowingly sold defective mortgages to the home-loan financier. The bank will pay $541 million in total once adjusted for the previous mortgages it has already repurchased.
According to The Wall Street Journal, Wells Fargo claims the deal absolves the company of all buyback demands from loans sold to Fannie Mae that were originated before 2009.
Although JPMorgan Chase and Bank of America have been at the forefront of the mortgage crisis government blitz, Wells Fargo has not been able to escape litigation pressure as of late. The bank is the next to face pressure under the Financial Institutions Reform and Recovery Act (FIRREA) following a year-long investigation into its dealings. In addition, ex-Wells Fargo executive Kurt Lofrano was added to the government’s “reckless spending” suit against the bank in late November.
As a result of government pressure, Wells Fargo has agreed to step up its risk and compliance game heading into 2014. In December, the bank announced that it would be undergoing a two-year ethics review with the intent of avoiding future lawsuits. The review will last about 18-24 months and is being led by the newly formed Ethics Program Office and deputy general counsel Christine Meuers.
For Fannie Mae, this settlement is the latest in a long line of legal victories for the financier. Deutsche Bank AG announced in late 2013 that it would pay $1.93 billion to settle a lawsuit from the Federal Housing Finance Agency, which controls Fannie Mae and its smaller sibling Freddie Mac.
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