Wells Fargo announced a $1.2 billion agreement with the federal government to resolve claims related to its Federal Housing Administration lending program for the time period between 2001-2010, along with other potential civil claims relating to the bank’s FHA lending activities for other periods.
Wells Fargo said in a filing with the Securities and Exchange Commission that it reached an agreement in principle with the Department of Justice, 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.
The settlement hit a roadblock back in November 2014 when both sides’ talks of negotiating a settlement started to slow down, with both parties no longer as optimistic as they once were.
In the lawsuit, originally filed in October 2012, the DOJ sought damages and civil penalties under the False Claims Act.
Since this announcement came shortly after its fourth-quarter earnings, the bank said in its filing that it provided for an additional legal accrual which increased operating losses within non-interest expense by $200 million.
As a result, the bank said it reduced its net income for the year ended Dec. 31, 2015, by $134 million, or $0.03 per common share, to $22.9 billion, or $4.12 per common share.
When it announced on Jan. 15, Wells Fargo’s fourth quarter 2015 net income came in at $5.7 billion, or $1.03 per share, compared with $5.7 billion, or $1.02 per share, for fourth quarter 2014.
“Wells Fargo and the United States government have reached an agreement in principle to resolve claims regarding our FHA lending activities, and the company has made an addition to its previously announced reserves to reflect this development. However, we can’t provide any additional details at this time,” said Catherine Pulley, a spokesperson for Wells Fargo.
The bank added in the SEC filing that although it reached an agreement in principle with the federal government to resolve these matters, there is no assurance that the two will agree on the final documentation of the settlement.