Wells Fargo and DOJ Reach $2 Billion-Plus Settlement Over Legacy Loans

Wells Fargo has agreed to pay $2.09 billion to the U.S. Department of Justice (DOJ) to resolve a previously-disclosed investigation regarding claims related to Residential Mortgage-Backed Securities (RMBS) legacy loans dating back to 2005-2007.

 

“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 Chief Executive Officer Tim Sloan. “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.”
Under the terms of the agreement, Wells Fargo, without admitting liability, will pay a civil monetary penalty to resolve all civil claims available to the U.S. government under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) covered activities.

 

The U.S. has also agreed to release Wells Fargo from any potential claims arising under the Program Fraud Civil Remedies Act (RICO), the Injunctions against Fraud Act and on certain other grounds. Importantly, there were no claims that individual customers were harmed as a result of the alleged conduct. The DOJ has previously reached agreements with a number of other banks to resolve similar RMBS issues.

 

Earlier in May, Royal Bank of Scotland Group (RBS) agreed to a $4.9 billion settlement with the DOJ related to the company’s issuance and underwriting of RMBS between 2005-2007. In April of 2016, Goldman Sachs Group agreed to a $5.1 billion settlement with the DOJ regarding issues with its pre-2008 RMBS.

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