Wells Fargo to pay $2.1 bn fine to settle US mortgage probe: DOJ
New York (AFP) –
Wells Fargo will pay $2.1 billion to settle US charges it misrepresented the quality of home loans used in securities that led to 2008 financial crisis, the Justice Department announced Wednesday.
Wells Fargo originated and sold mortgage loans that it knew contained incorrect income information, warranting a civil penalty, the Justice Department said in a statement.
Between 2005 and 2007, Wells Fargo was the second largest originator of residential mortgages pushed hard into sub-prime loans by encouraging underwriters to be more aggressive, according to a settlement agreement signed by Wells Fargo and released by the Justice Department.
Testing by the bank showed that a "substantial" number of loans contained misrepresentations or "materially inaccurate" income but the bank still greenlighted the loans through the process.
Wells Fargo sold at least 73,529 loans in mortgage-backed securities during this period and nearly half have defaulted, the settlement document said.
"Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans," Alex Tse, acting US Attorney in the Northern District of California, said 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."
The penalty comes on the heels of numerous other fines on Wells Fargo in the wake of a scandal that blew up in 2016 over fake bank accounts.
Other large banks, including JPMorgan Chase and Bank of America, have paid billions of dollars to settle violations connected to the US housing bust.
"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 chief executive Tim Sloan said.
"Wells Fargo remains focused on our 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."
Wells Fargo agreed to settle the charges without admitting liability.
© 2018 AFP