Company executives were well aware their residential mortgage loans contained “misstated income information” which led to investors suffering from billions of dollars in losses from investing in residential mortgage-backed securities (RMBS).
“This settlement holds Wells Fargo accountable for actions that contributed to the financial crisis,” Acting Associate Attorney General Jesse Panuccio said in a statement. “It sends a strong message that the Department is committed to protecting the nation’s economy and financial markets against fraud.”
Between the periods of 2005 to 2007, Wells Fargo sold at least 73,539 stated income loans that were included in RMBS. About half of the loans ended up defaulted, resulting in major losses to investors, according to the DOJ.
On June 30, the amount of the settlement was fully accrued, according to the bank.
In the bank’s own testing, they found more than 70 percent of its loans had an “unacceptable variance” between what the borrower’s income could afford and how much they had to pay. After further testing, they found that “nearly half” of the stated income loans had both an unacceptable variance and no “plausible explanation” for why.
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