Wells Fargo has signed a $591m mortgage settlement agreement with the Federal National Mortgage Association (Fannie Mae) to settle down all the claims arising out of mis-selling mortgage loans to the company.
Under the terms of the agreement, the agreement resolves substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to 1 January 2009.
Wells Fargo reimbursed $541m in cash to the government-controlled mortgage company Fannie Mae after adjusting for prior repurchases, according to a statement issued by the San Francisco-based bank.
Fannie Mae chief executive officer Timothy Mayopoulos said, "This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear-view mirror and begin 2014 focused on improving the future of housing finance."
In September 2013, Wells Fargo agreed to pay $869m penalty to Federal Home Loan Mortgage Corporation (Freddie Mac) to settle substantially all repurchase liabilities on faulty loans sold.
Not only Wells Fargo, but also Bank of America, CitiMortgage, SunTrust, JPMorgan Chase, Flagstar, PNC and HSBC Bank USA have reached settlement agreement with the government-sponsored enterprise.
The US Federal Housing Finance Agency (FHFA) accused the bank for willingly selling the subprime loans packaged into securities to Fannie Mae (FNMA) and Freddie Mac (FMCC), despite knowing that the assets were faulty in nature.
In 2011, FHFA filed 18 lawsuits against financial organizations involving $200bn claim of residential mortgage backed securities (RMBS) sold between 2005 and 2007 to Fannie and Freddie by giving materially false statements about the quality of mortgages.
Fannie Mae and Freddie Mac busted during the height of financial crisis of 2008, subsequently the US government pumped nearly $187.5bn, to keep them running.
Image: Wells Fargo’s corporate headquarters in San Francisco. Photo courtesy of Laimerpramer.