Wells Fargo & Company
) announced a settlement with the Federal Housing Finance Agency
(FHFA) - conservator of Government Sponsored Enterprises (GSEs)
Freddie Mac and Fannie Mae. The settlement is related to the sale
of home loans and mortgage backed securities (MBS). Wells Fargo
had to shell out a sum of less than $1 billion for the
Wells Fargo was the only major U.S. bank that was not imputed in
the FHFA lawsuit. The FHFA sued 18 international institutions for
selling faulty mortgages and securities to Fannie Mae and Freddie
Mac. Wells Fargo managed to evade the lawsuit as its lawyers were
already in negotiation with the FHFA regarding a settlement.
Notably, the penalty for Wells Fargo is considerably lower than
that of its Wall Street peer,
JPMorgan Chase & Co.
), which agreed to pay $4.0 billion to FHFA. Earlier this year,
) also settled their cases with the FHFA.
In October, Wells Fargo announced a settlement with Freddie Mac
worth about $869 million. The settlement included the resolution
of all outstanding and potential repurchase claims relating to
misrepresentation of loans originated and sold by Wells Fargo
directly to Freddie Mac before 2009.
The lawsuit settlement by Wells Fargo reflects the bank's aim to
resolve all mortgage-related issues, and thereby reduce costs
over the upcoming period. Moreover, such agreements are expected
to help revive the economy and hence bode well for the bank.
Wells Fargo currently carries a Zacks Rank #3 (Hold).
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