Despite $1.2B settlement, Wells Fargo still facing DOJ probe into mortgage operations
Discloses ongoing federal and state investigations
Despite recently agreeing to a $1.2 billion settlement with the federal government to resolve claims related to its Federal Housing Administration lending program from 2001-2010, Wells Fargo is still facing investigations into its “mortgage related practices” from the Department of Justice, as well as other federal and state agencies, the megabank disclosed this week.
According to a Reuters report, Wells Fargo stated in is 10-K filing with the Securities and Exchange Commission that the bank is currently under investigation by a number of agencies over the mortgage operations of both Wells Fargo and its “predecessor institutions.”
The news of the ongoing investigations come less than a month after Wells Fargo agreed to the more than $1 billion settlement with the DOJ, the U.S. Attorney’s Office for the Southern District of New York, the U.S. Attorney’s Office for the Northern District of California and the U.S. Department of Housing and Urban Development.
That settlement stemmed from a lawsuit that was originally filed in October 2012, in which the DOJ sought damages and civil penalties under the False Claims Act.
In its 10-K, Wells Fargo noted that the $1.2 billion settlement with the feds is not yet finalized.
“Although Wells Fargo and the Federal Government have reached an agreement in principle to resolve these matters, there can be no assurance that Wells Fargo and the Federal Government will agree on the final documentation of the settlement,” Wells Fargo said in its 10-K.
And, it appears that settlement didn’t get Wells Fargo out of the crosshairs of the DOJ and other agencies.
“Wells Fargo, for itself and for predecessor institutions, has responded, and continues to respond, to requests from these agencies seeking information regarding the origination, underwriting and securitization of residential mortgages, including sub-prime mortgages,” the bank stated.
Wells Fargo also stated that it has established a potential liability for its “contingent litigation losses,” based ona “range of potential losses for each matter that is both probable and estimable.”
Wells Fargo stated that the “high end of the range of reasonably possible potential litigation losses in excess of the company’s liability for probable and estimable losses was approximately $1.3 billion,” as of Dec. 31, 2015.
“For these matters and others where an unfavorable outcome is reasonably possible but not probable, there may be a range of possible losses in excess of the established liability that cannot be estimated,” Wells Fargo added.
“Based on information currently available, advice of counsel, available insurance coverage and established reserves, Wells Fargo believes that the eventual outcome of the actions against Wells Fargo and/or its subsidiaries, including the matters described above, will not, individually or in the aggregate, have a material adverse effect on Wells Fargo’s consolidated financial position,” Wells Fargo stated. “However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to Wells Fargo’s results of operations for any particular period.”