Wells Fargo to pay $2 billion penalty for alleged misrepresentation of loan quality
- It is the Justice Department's latest settlement related to mortgage-backed securities in a long-running investigation into bank activities that it says helped precipitate the 2008 financial crisis.
- Wells Fargo is paying the civil penalty without admitting liability. The government says it originated and sold tens of thousands of mortgages it knew were based on faulty income information.
Wells Fargo will pay $2.09 billion in penalties for allegedly misrepresenting loan quality, according to the U.S. Attorney's Office for the Northern District of California.
The bank will pay the civil penalty after allegedly originating and selling tens of thousands of residential mortgage loans it knew contained misstated income information and didn't meet the quality that Wells represented, causing mortgage-backed bond investors to lose billions of dollars. Wells is not admitting to liability.
"Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans," said Alex G. Tse, acting U.S. attorney for the district, in a statement.
It is the latest legal blow for San Francisco-based Wells Fargo, which has been trying to emerge from a more recent issue concerning product sales. In April, the bank paid $1 billion to settle abuses in sales of products related to auto and mortgage loans. The mortgage-backed securities at the center of the agreement announced Wednesday date back more than a decade, to 2005 to 2007, and are not related.
"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.