Wells Discloses Fair Lending Investigation

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MORTGAGE EXPERT
5 · 08 · 12

A disclosure by Wells Fargo & Co. indicates that the nation’s biggest mortgage lender is under investigation for potential violations of fair lending laws. But a settlement has been reached with mortgage-backed securities investors.

The Department of Justice is investigating Wells Fargo, according to a Form 10-Q filing Tuesday with the Securities and Exchange Commission.

The San Francisco-based company said that the government is trying to determine whether it violated laws including fair lending laws in its mortgage origination practices.

“The Department of Justice has advised Wells Fargo that it believes it can bring claims against Wells Fargo for monetary damages and civil penalties under fair lending laws,” the filing stated. “We believe such claims should not be brought and continue seeking to demonstrate to the Department of Justice our compliance with fair lending laws.”

Wells Fargo was the biggest originator of residential loans during the first quarter with $129 billion in production. It also reigned supreme for all of 2011 by funding $357 billion in home loans.

Tuesday’s filing also indicated that three insurance companies settled in February a federal lawsuit that was originally filed in Manhattan in April 2011 against defendants that included Wells Fargo Asset Securitization Corp., Wells Fargo Bank, N.A., and Credit Suisse First Boston Securities Corp.

The plaintiffs asserted various state law fraud claims and three claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 on MBS investments from 2005 through 2007.

Wells Fargo estimates that its current liability for contingent litigation losses is $927 million on the high end.

The Union Central Life Insurance Company, et al. v. Credit Suisse First Boston Securities Corp., et al.
April 28, 2011 (U.S. District Court for the Southern District of New York).

Mortgage Expert

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