Wells Fargo CFO John Shrews said at a September investor conference that the bank, like others, will cut back on such loans in the future, especially to riskier borrowers.
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Wells Fargo & Co said on Wednesday it would pay $1.2 billion to resolve some civil claims related to its Federal Housing Administration (FHA) lending program, primarily between 2001 and 2010.
The San Francisco bank, the nation’s largest mortgage lender, has been in talks with the government since 2012 over accusations that it improperly classified some FHA loans as qualifying for federal insurance when they did not, and that it knew of the misclassification but failed to inform housing regulators about the deficiencies before filing insurance claims.
8-K filing on Wednesday, Wells Fargo reached an “agreement in principle” with the U.S. Department of Justice, the U.S. Attorney’s Office for the Southern District of NY, the U.S. Attorney’s Office for the Northern District of California, and HUD.
Prosecutors alleged the bank “engaged in a regular practice of reckless origination and underwriting” of FHA loans, which are backed by federal insurance and aim to help first-time home buyers.
The US Justice Department sued the bank in 2012, after paying out insurance when the loans went bust. Wells Fargo announcement did not include any acknowledgment of wrongdoing.
Wells Fargo is laying off 87 additional mortgage workers in Raleigh.
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Because Wells Fargo had to add to legal costs, the firm lowered its 2015 earnings by $134 million, or 3 cents a share, to according to the filing. The company said the agreement still needs to be approved.
