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Investments

Fannie inks $591M settlement with Wells Fargo

Deal resolves most legacy repurchase claims at the GSE

Fannie Mae

Just a few days before the end of the year, Fannie Mae resolved legacy repurchase issues within the government sponsored enterprise by entering into a $591 settlement agreement with Wells Fargo & Co. (WFC).

As part of the deal, Fannie will receive $541 million in the fourth quarter of this year while releasing Wells Fargo from repurchase obligations on toxic loans once sold off to the government-sponsored enterprise. That figure includes adjustments for previous repurchases.

"We have closed out our legacy repurchase reviews with this agreement with Wells Fargo," said Timothy Mayopoulos, president and CEO of Fannie Mae. "This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance."

The deal mirrors other agreements in that Wells Fargo is not entirely off the hook. The firm is still obligated for contractual responsibilities under the agreement, Fannie said in a press statement.

The settlement hatched this week follows a series of repurchase deals inked by Fannie this past year, including a $10.3 billion agreement with Bank of America (BAC). Then, back in July, the GSE signed a $968 million agreement with CitiMortgage (C) to resolve repurchase issues, which was followed by a $373 million repurchase settlement with SunTrust (STI) and a $670 million agreement with JPMorgan Chase (JPM).

Flagstarwhich announced a repurchase settlement with Freddie Mac Monday morning — also settled with Fannie for $121.5 million over repurchase obligations earlier this year. Fannie also inked a $140 million deal with PNC (PNC) and an $83 billion agreement with HSBC Bank USA.

Fannie disclosed in a September securities filing that it has reviewed 94% of the loans delivered to the GSE from 2005 through 2008 for underwriting defects that could qualify the firm for a repurchase request.

The goal of the GSE was to get all of this behind it before the start of 2014. Monday's deal with Wells Fargo suggests Mayopoulos sees this issue as mostly resolved heading into the new year.

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