Wells Fargo settles with ResCap over faulty mortgage securities
Resolves another battle dating back to the financial crisis
Wells Fargo and Residential Capital, also called ResCap, settled mortgage claims dating back to the financial crisis over toxic mortgage securities, according to an article in The Wall Street Journal by Andrew Scurria.
The article cited sources close to the matter that said Wells Fargo helped push the subprime mortgage lender into bankruptcy.
From the article:
The bank reached the agreement with the trust overseeing ResCap’s liquidation, according to court documents and the people familiar. The settlement punctuates a forgettable 2016 for Wells Fargo, which has suffered through a scandal around its creation of bogus customer accounts and new regulatory sanctions over the rejection of its so-called living will.
Although the terms of Wells Fargo’s deal weren't made public, the trust has now recovered just under $400 million through settlements, according to the people familiar with the matter. As of Nov. 9, recoveries had totaled $237 million, according to the trust’s financial disclosures.
The settlement is only the latest in a long string of banks still resolving toxic mortgage issues after the financial crisis.
Even as recently as last week, the U.S. Department of Justice sued Barclays for allegedly deceiving investors who bought mortgage-backed securities.
ResCap has been on both sides of the problem, however. Back in November, Ally Financial, which ResCap is a subsidiary of, announced it will pay $52 million to settle allegations that ResCap knowingly marketed mortgage bonds despite the fact that the underlying mortgages were toxic.