Wells Fargo will pay more than half a billion dollars to mortgage giant Fannie Mae to settle a disagreement over bad loans sold by the bank before the financial crisis.
The San Francisco bank announced Monday that it had reached a $591 million agreement with Fannie Mae to cover all mortgages sold before 2009. After the mortgages went sour, Fannie Mae sought to force Wells Fargo to buy them back, claiming their quality was misrepresented.
Wells Fargo will make a cash payment of $541 million after adjusting for deals the two have made before. Wells says it has already set aside enough money to cover the settlement.
“This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance,” Fannie Mae CEO Tim Mayopoulos said in a statement. He is also a former general counsel at Bank of America.
The agreement with Wells Fargo marks the latest in a string of settlements between major banks, Fannie Mae and the government regulator that oversees Fannie, the Federal Housing Finance Agency.
Nearly a year ago, Charlotte-based Bank of America agreed to pay $10 billion to settle claims with Fannie Mae. The deal included $3.6 billion in cash and required the repurchase of more than 30,000 loans.
Fannie has also entered into similar agreements with SunTrust Banks, CitiMortgage, J.P. Morgan Chase, Flagstar, PNC and HSBC Bank in settlements that totaled a combined $2.36 billion.
Dunn: 704-358-5235; Twitter: @andrew_dunn