Wells Fargo to pay $1.2 billion to settle home loan case

The deal that was announced Wednesday is an agreement in principle between Wells Fargo and the U.S. Attorney’s offices in San Francisco and Manhattan and the U.S. Department of Housing and Urban Development, or HUD.

NEW YORK | Wells Fargo says it has agreed to pay $1.2 billion to settle a lawsuit from the government related to its Federal Housing Administration home mortgage program.

Wells Fargo, the country’s largest mortgage lender, said the settlement is related to the 2012 case and other pending or potential cases.

Wells Fargo also internally identified 6,558 seriously deficient loans that it was required to self-report. The claims were civil and focused on Wells Fargo’s lending under the FHA program from 2001 to 2010.

Several lenders including Bank of America Corp, Citigroup Inc and Deutsche Bank AG have resolved federal lawsuits over FHA-insured loans.

In a 2012 lawsuit, the US government accused Wells Fargo of sticking it with “hundreds of millions of dollars” in Federal Housing Authority insurance claims as a result of years of “reckless” underwriting and fraudulent loan certification.

Regulators have contended that the bank should not have received the insurance proceeds after some of the loans soured.

Wells Fargo CFO John Shrews said at a September investor conference that the bank, like others, will cut back on such loans in the future, especially to riskier borrowers.

As a result, the bank said it reduced its net income for the year ended December 31, 2015, by $134 million, or $0.03 per common share, to $22.9 billion, or $4.12 per common share.