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Wells Fargo is not out of the woods yet even after agreeing to a $1.2 billion settlement earlier in February over its underwriting practices on FHA-insured loans. According to Wells Fargo’s annual 10-K filing this week, the bank is now being investigated by the U.S. Department of Justice and other federal and state regulators over its mortgage practices.
“Federal and state government agencies, including the United States Department of Justice, continue investigations or examinations of certain mortgage related practices of Wells Fargo and predecessor institutions,” Wells Fargo stated in the filing. “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.”
A Wells Fargo spokesperson said the bank did not have a comment beyond what was in the filing.
It has been a tough year so far for Wells Fargo in 2016. During the first week of February, the bank slashed 581 jobs from its mortgage servicing division due to continuing market changes, namely the continued substantial decline in distressed property volume. This came after Wells Fargo cut 490 jobs from its mortgage servicing division in October 2015.
Then, on February 1, Wells Fargo reached an agreement in principle with several regulators, including the U.S. 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 HUD to resolve allegations that the bank was “reckless” in certifying the credit and underwriting quality of FHA loans it originated. An 8-K filing with the SEC noted that Wells Fargo agreed to pay $1.2 billion to resolve those civil claims that the federal government had pending against the bank concerning its lending program from 2001 to 2010, including other potential civil claims relating to the lender's FHA lending activities for other periods.
The February settlement was not the first between Wells Fargo and the government over mortgage practices. In February 2012, Wells Fargo was among the nation’s five largest servicers (Bank of America, JPMorgan Chase, Citigroup, and Ally Financial, formerly GMAC, were the other four) to settle with the DOJ, HUD, and 49 state attorneys general for a combined total of $25 billion over mortgage servicing and foreclosure abuses.
