Wells Fargo Settles FHFA Dispute for $335M - Analyst Blog


Wells Fargo & Company ( WFC ) 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 fraudulent sale of home loans and mortgage backed securities (MBS) to Freddie Mac and Fannie Mae. According to a regulatory filing, Wells Fargo has to shell out a sum of $335 million for the settlement.

Wells Fargo is not the only major U.S. bank to be censured in the FHFA lawsuit. The FHFA sued 18 international institutions for selling faulty mortgages and securities to Fannie Mae and Freddie Mac in 2011. 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. ( JPM ), which agreed to pay $4.0 billion to FHFA. Earlier this year, UBS AG ( UBS ) and Citigroup Inc. ( C ) also settled their cases with the FHFA.

In October, Wells Fargo also announced a settlement with Freddie Mac worth about $869 million. The settlement included the resolution of all outstanding and potential repurchase claims relating to the misrepresentation of loans originated and sold by Wells Fargo directly to Freddie Mac before 2009.

The settlements by Wells Fargo depict its efforts to resolve all mortgage-related issues, and thereby reduce costs in the coming months. Moreover, such agreements will likely help revive the economy, and bode well for the company. Wells Fargo currently carries a Zacks Rank #3 (Hold).

CITIGROUP INC (C): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

UBS AG (UBS): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: C , JPM , UBS , WFC



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