Boston, MA 01/02/2014 (wallstreetpr) – Wells Fargo & Co (NYSE:WFC) has agreed to pay a net settlement of $541 million to Fannie Mae in connection to the defective home loans sold by the bank to the mortgage institution before 2009. Fannie Mae and its smaller sibling Freddie Mac have been asking banks to repurchase the mortgage loans sold to them after realizing the financial troubles connected to the deals.
This latest settlement deal was reached this week. Wells Fargo & Co (NYSE:WFC) is the largest mortgage bank in the U.S. and the third largest bank in the U.S. the bank, like most of its peers has paid dearly for transacting defective mortgage loans since the financial crisis.
Fannie Mae alone has successfully pushed for loan repurchase totaling $6.5 billion against banks such as Bank of America Corp (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo & Co (NYSE:WFC) among other lenders. BAC settled a $3.6 billion deal with Fannie Mae in January last year, with most of the claims originating from Countrywide Financial.
In July last year Citigroup Inc (NYSE:C) agreed to $968 million settlement accord with mortgage institution.
To come to the agreement of $541 million cash settlement with Fannie Mae, Wells Fargo & Co (NYSE:WFC) had sought credit adjustments which helped to reduce the initial amount for this settlement from $591 million. Following this agreement, the two institutions will be able to settle substantially all repurchase claims related to the deals transacted before 2009.
It should be recalled that in September last year Wells Fargo & Co (NYSE:WFC) agreed to a similar settlement deal worth $780 million with Freddie Mac.
Ready to pay
Wells Fargo & Co (NYSE:WFC) needs to resolve these issues to allow it restore its reputation and gain better focus in its primary business. The bank announced last year that it had set aside money to meet the claims arising from the two government-backed mortgage institutions. This essentially means that the bank is not expecting the latest settlement to have a dent in its profit in the current quarter.
Wells Fargo & Co (NYSE:WFC) is recovering gradually from the shock of the financial crisis about four years ago. However, the pressure in the housing financing market is still dragging its march to full profitability.