Pedestrians pass in front of a Wells Fargo & Co. bank branch in New York.

Scott Eells, Bloomberg

Wells Fargo settles dispute over toxic mortgage bonds for $335M

  • Article by: Jennifer Bjorhus
  • Star Tribune
  • November 6, 2013 - 9:09 PM

Wells Fargo & Co. is paying $335 million to settle claims it misrepresented the quality of mortgage-backed bonds it peddled to Fannie Mae and Freddie Mac in the years running up to the housing collapse.

The dollar amount of the combined settlements was disclosed in the quarterly financial report the bank filed Wednesday with the government. The bank already had money set aside to cover the payments, it said.

San Francisco-based Wells Fargo declined to discuss the agreements, as did the Federal Housing Finance Agency (FHFA), which oversees Fannie and Freddie.

The settlement is the latest to address losses from the tsunami of toxic mortgages at the heart of the country’s housing crisis. The FHFA sued 18 of the world’s biggest financial institutions in 2011, claiming they misrepresented the private-label mortgage-backed securities they sold to Fannie Mae and Freddie Mac. It’s been trying to recover some of the huge losses the mortgage finance companies suffered.

Wells Fargo avoided the FHFA lawsuits and was not one of the 18 defendants because it was already in discussions over the matter with the FHFA.

So far, four of the financial institutions have settled: General Electric Co., Citigroup Inc., UBS Americas Inc. and JPMorgan Chase & Co.

UBS settled for $885 million. JP­Morgan, the country’s largest bank by assets, settled for $5.1 billion, which also included a payment directly to Fannie Mae and Freddie Mac for other mortgage-related claims.

JPMorgan’s $5.1 billion payment is part of the bank’s widely reported $13 billion civil deal with the Justice Department over mortgage practices before the housing meltdown. A criminal probe into fraud allegations around JPMorgan’s mortgage bond practices, led by the U.S. attorney’s office in Sacramento, Calif., continues.

The settlements are separate from the agreements banks have made to buy back faulty mortgage bonds they sold to Fannie Mae and Freddie Mac.


Jennifer Bjorhus • 612-673-4683

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