Wells Fargo & Co (NYSE:WFC) announced Monday that it has reached an agreement with Federal National Mortgage Assctn Fannie Mae (OTCBB:FNMA) to resolve substantially all repurchase liabilities.
The country’s largest mortgage lender said the agreement relates to loans sold to Fannie Mae that were originated prior to January 1, 2009.
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Wells Fargo deal resolves legacy issues
According to a statement issued by Fannie Mae, after adjustments for prior repurchases, Wells Fargo & Co (NYSE:WFC) will pay Federal National Mortgage Association Fannie Mae (OTCBB:FNMA) $541 million in the fourth quarter of 2013 and be released from repurchase liability for these loans, with certain exceptions.
Fannie Mae’s CEO Timothy J. Mayopoulos indicated the GSE has closed out its legacy repurchase reviews with this agreement with Wells Fargo & Co (NYSE:WFC). Moreover, he indicated this agreement represents a fitting conclusion to the GSE’s year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance.
Saabira Chaudhuri of The Wall Street Journal points out that the federal regulator for Fannie and Freddie has directed the firms to reduce repurchase demands outstanding by year-end.
She points out Wells Fargo & Co (NYSE:WFC)’s deal with Fannie Mae comes after Deutsche Bank AG recently said it would pay $1.93 billion to settle a lawsuit filed by the Federal Housing Finance Agency, though the settlement doesn’t resolve separate litigation filed earlier this year by the GSEs against Deutsche Bank AG (NYSE:DB) (FRA:DBK) (ETR:DBK) and other Wall Street firms over losses the mortgage giants allege they sustained from manipulation of interest rates.
Series of settlements in 2013
Saabira Chaudhuri points out in late November, Fifth Third Bancorp (NASDAQ:FITB) agreed to pay $25 million to Freddie Mac to settle claims that it sold soured mortgaged to the agency. Other banks that have recently settled with Federal Home Loan Mortgage Corp (OTCBB:FMCC) or Fannie include SunTrust Banks, Inc. (NYSE:STI) and Flagstar Bancorp Inc (NYSE:FBC).
In January, Bank of America Corp (NYSE:BAC) took a huge step when it declared the settlement with Fannie Mae regarding ongoing repurchase claims for fraudulent mortgages sold by its Countrywide financial subsidiary through December 31, 2008.
In July, Citigroup Inc (NYSE:C) announced it has reached an agreement to pay $968 million to Fannie Mae to resolve potential claims over residential first-mortgage claims.
According to Dakin Campbell of Bloomberg, Wells Fargo had set aside funds to cover the full cost of the $591 million settlement as of September 30.
Interestingly, Wells Fargo & Co (NYSE:WFC) reached a $869 million accord with Fannie’s smaller sibling, Federal Home Loan Mortgage Corp (OTCBB:FMCC), in September to resolve disputes on a similar subset of loans.