Wells Fargo & Co (NYSE:WFC), the fourth-largest bank in the United States in terms of assets, agreed to pay a penalty of $335 million to settle the claims of the Federal Housing Finance Agency (FHFA), according to its regulatory filing on Wednesday.
FHFA says Wells Fargo mislead investors
The agency alleged that that bank misled investors in disclosures on mortgage securities sold to mortgage giants Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).
Wells Fargo & Co (NYSE:WFC) said the amount required to settle the case was already set aside, which means the settlement has no impact on its earnings. The bank did not provide specific details about the terms of the settlement, particularly the specific amounts that will go to FHFA. The bank reached a settlement with the mortgage giants earlier this year, and each will get certain amounts from the $335 million settlement.
Wells Fargo’s agreement with Freddie Mac
In addition, Wells Fargo & Co (NYSE:WFC) also entered an $869 million settlement agreement with Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) related to its repurchase liabilities in September. The deal contributed to the decline of the repurchase of the bank to $1.4 billion from $2.2 billion.
Last month, JPMorgan Chase & Co. (NYSE:JPM) settled the complaint filed against it by the FHFA for $5.1 billion while Ally Financial Inc agreed to resolve the agency’s charges against it for $520 million last week. On the other hand, the FHFA is seeking a $6 billion penalty from Bank of America Corp (NYSE:BAC) related to securities worth $57.5 billion, according to people familiar with the issue.
FHFA’s worldwide lawsuits
In 2011, the FHFA filed 18 lawsuits against large banks worldwide related to mortgage securities worth $200 billion sold to Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC).
In a separate report, Wells Fargo & Co. (NYSE:WFC) is facing a federal investigation related to the sales of mortgage-backed securities. People familiar with the situation said authorities are investigating whether the bank violated the Financial Institution Reform and Recovery Act (FIRREA), which allows the government to file a lawsuit against federally insured entities. The law has a 10-year statute of limitations.