Wells Fargo Agrees to Pay $125M to Settle MBS Claims
The Wall Street Journal reported on July 9, 2011 that Wells Fargo & Company has agreed to settle claims by a group of pension funds over losses from investments in mortgage backed securities (MBS) that the firm sold to investors leading up to the financial crisis of 2008. The settlement of $125 million disposes of claims by investors that Wells Fargo "routinely disregarded the underwriting guidelines" for mortgages that were the underlying assets of the mortgage backed securities (MBS) that the pension funds bought still must be approved by the court.
The settlement represents only a small fraction of the overall MBS problems for Wells Fargo, during the time from 2006 and 2007. It applies to a specific set of 28 MBS deals and ends a two year old fight over the underwriting of billions of dollars worth of MBS at the peak of the housing boom. Some of the plaintiffs in the case included the pension funds of California's Alameda County, New Orleans, Louisiana Sheriff's Fund and Guam, among others.
Wells Fargo is still dealing with suits seeking billions by institutional investors, such as Federal Home Loan Banks and Charles Schwab. The estimated payout according to the article could be in the $700 million range. Just last week, Bank of America reached a similar settlement with BlackRock, MetLife and Federal Reserve Bank of New York for $8.5 billion.