Wells Fargo Reaches $2 Billion Settlement for Mortgage Loan Controversy
Wells Fargo has agreed to pay $2.09 billion in fines for a mortgage loan incident. Between 2005 and 2007, Wells Fargo allegedly created and sold mortgage loans containing misstated income information, costing investors billions of dollars during the Recession.
The penalty is in accordance with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The Department of Justice alleges Wells Fargo knew that loan documents contained incorrect income information, and reported false debt-to-income ratios to investors. Over the last decade, nearly half of these loans have defaulted. Investors may have reconsidered buying the loans if they were aware of their true risk levels.
Wells Fargo did not admit liability in the settlement. Tim Sloan, the bank’s CEO, said, “We are pleased to put behind us these legacy issues…that occurred more than a decade ago.”
Moving forward from the past is a recurring theme for Wells Fargo. The bank’s latest advertising campaign says “Established 1852. Re-established 2018.” The bank stated it has ended product sales goals for retail bankers, which means bank employees will no longer be pressured to sell certain products and services to customers. This was a primary component of the fake accounts scandal, where employees illegally enrolled customers in accounts without their knowledge. The bank has since paid a $142 million settlement to resolve those matters.