WASHINGTON, D.C. — Wells Fargo Bank NA and several of its affiliates have agreed to pay a $2.09 billion penalty for allegations by the federal government that the bank misstated income information and misrepresented the quality of the loans used in residential mortgage-backed securities (RMBS).
According to the U.S. Department of Justice, the loans originated by Wells Fargo caused RMBS investors, which included some federally insured financial institutions, to lose billions of dollars.
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” acting U.S. attorney for the Northern District of California Alex Tse said in a statement. “[This] agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted."
The Justice Department Wells Fargo knew that a substantial portion of the stated income loans had misstated income and that the company did not disclose the information but reported false-debt-to-income ratios regarding the loans it sold.