Settlement Agreement Reached By Fannie Mae With Wells Fargo

Settlement Agreement Reached By Fannie Mae With Wells Fargo

Around $541 million in settlement claims will be paid by Wells Fargo & Co to Fannie Mae for faulty home loans. This will complete the efforts of the government-controlled mortgage company to reacquire loans that were made prior to the financial crisis.

Buyback settlements with eight banks have reached around $6.5 billion, according to Fannie Mae. This figure includes the settlement paid by Wells Fargo, the fourth biggest bank according to assets in the country. It also covers the $3.6 billion settlement with the Bank of America last January for loans from the former Countrywide Financial Corp and the bank. The chief executive of Fannie Mae, Timothy Mayopoulos was a former general counsel of Bank of America.

The $968 million settlement with Citigroup Inc is also included in the amount.

The settlement of Wells Fargo will require a cash payment of $541 million after adjustments are made for credits prior to the repurchase. The total settlement prior to the adjustment was at $591 million.

All repurchase claims over loans sold by the biggest mortgage lender in the US before 2009 are included in the agreement. Mayopoulos said the agreement demonstrates a conclusion to the hard work to get past legacy issues and allow the company to concentrate on enhancing future housing finance in 2014.

Last September, Wells Fargo agreed to pay $780 million to repurchase claims by Freddie Mac. Sufficient funds were set aside for the most recent settlement.

The Federal Housing Finance Agency or FHFA directed Freddie Mac and Fannie Mae in reducing the outstanding demands for loan repurchase by the end of the year. It reached numerous agreements with separate lenders.

Banks can be compelled to repurchase home loans if warranties and representations in connection to underwriting are proven false along with the capability of the borrowers in making the payments No statements were released by Freddie Mac in connection to the repurchase efforts.

A number of other lawsuits are also being pursued by the FHFA against numerous banks in connection to mortgage securities sold to the two companies. Freddie Mac and Fannie Mae were controlled by the government on the 7th September 2008, which placed them into a conservatorship.

Posted by James Fried on Tuesday December 31 2013, 4:37 AM EST. Ref: Reuters. Link. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0