Wells Fargo to pay $1.2 billion to end home loan mess
NEW YORK - Another Wall Street bank accused of reckless lending during the housing crash is offering a payout to resolve its legal problems.
Wells Fargo (WFC), one of the biggest providers of home loans in the U.S., said Wednesday it has agreed to pay $1.2 billion to settle a government lawsuit related to its Federal Housing Administration home mortgage program.
The bank said Wednesday in a regulatory filing that it reached the agreement earlier this week with the U.S. Department of Justice, two attorneys general and the Department of Housing and Urban Development. The company said the agreement still needs to be approved.
The Department of Justice declined to comment.
In 2012, the federal government sued Wells Fargo accusing the bank of misrepresenting the quality of thousands of loans in order to be eligible for federal loan insurance. The government wanted to recover money that the FHA paid after borrowers defaulted on Wells Fargo mortgage loans.
Wells Fargo, the country's largest mortgage lender, said the settlement is related to the 2012 case and other pending or potential cases.
The company said that because of the settlement, the bank will reduce its 2015 net income by $134 million, or 3 cents per common share, to $22.9 billion, or $4.12 per common share.
Shares of Wells Fargo, based in San Francisco, fell $1.57, or 3.2 percent, to $46.88 in afternoon trading.
The deal with Wells Fargo is the latest in a string of federal settlements stemming from the housing bust, which led to big banks requiring a massive bailout from U.S. taxpayers. Goldman Sachs Group (GS) said last week that it would pay $5.1 billion to settle a government probe into its sale of mortgage-backed securities.
Under separate settlements with the government, Wall street firms JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C) have agreed to pay $37 billion in cash and relief to consumers. In February, Morgan Stanley (MS) announced a proposed $2.6 billion agreement with the Justice Department to halt probes into its mortgage-back securities dealings, but that case remains unresolved.