BROWSE BY TOPIC
- Bad Brokers
- Compliance Concepts
- Investor Protection
- Investments - Unsuitable
- Investments - Strategies
- Wall Street News
- Investments - Private
- Rules & Regulations
- Bad Advisors
- Boiler Rooms
- Terminations/Cost Cutting
- General News
- Donald Trump & Co.
- Big Banks
- Regulatory Sanctions
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Wells Fargo to Pay $2Bn for Selling Toxic Residential Mortgages Leading up to the Financial Crisis
by Howard Haykin
In what may be the last of the settlements with the U.S. Department of Justice ("DOJ") over the big banks’ role in precipitating the 2008 financial crisis, Wells Fargo Bank and several of its affiliates agreed to pay $2.1 billion in civil penalties to settle DOJ charges that it violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) by misrepresenting the quality of mortgage loans that it sold to other investors.
The residential mortgage loans in question – which did not meet the quality that Wells Fargo represented - ultimately made their way into residential mortgage-backed securities (RMBSs) that defaulted, leaving investors, including federally insured financial institutions, with billions of dollars in losses.
According to the DOJ’s consent order, Wells Fargo “instituted a campaign in 2005 called ‘Courageous Underwriting,’ a philosophy that encouraged Wells Fargo’s underwriters to take more chances, and be more aggressive, in approving loans that were outside of Wells Fargo’s underwriting guidelines.” About 70% of the bank’s mortgages had an “unacceptable” divide between what the borrowers had to pay and what they could afford, according to the bank’s own research, the DOJ said. Almost half of those had no explanation for why, the DOJ said.
ACCORDING TO THE DOJ PRESS RELEASE, … its investigators alleged that, despite its knowledge that a substantial portion of its stated income loans contained misstated income, Wells Fargo failed to disclose this information, and instead reported to investors false debt-to-income ratios in connection with the loans it sold. Wells Fargo also allegedly heralded its fraud controls while failing to disclose the income discrepancies its controls had identified.
The United States further alleged that Wells Fargo took steps to insulate itself from the risks of its stated income loans, by screening out many of these loans from its own loan portfolio held for investment and by limiting its liability to 3rd parties for the accuracy of its stated income loans. Wells Fargo sold at least 73,539 stated income loans that were included in RMBS between 2005 to 2007, and nearly half of those loans have defaulted, resulting in billions of dollars in losses to investors.