Wells Fargo & Company (WFC - Free Report) 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 - Free Report) , which agreed to pay $4.0 billion to FHFA. Earlier this year, UBS AG (UBS - Free Report) and Citigroup Inc. (C - Free Report) 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).