By Ovunc Kutlu
NEW YORK (AA) – Wells Fargo agreed to pay a $2.09 billion penalty for allegedly misrepresenting the quality of loans used in residential mortgage-backed securities (RMBS), the Justice Department said Wednesday.
“Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo, ” it said.
The penalty is based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet certain qualities, according to the statement.
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” Acting U.S. Attorney for the Northern District of California Alex G. Tse said in the statement.
Acting Associate Attorney General Jesse Panuccio said the settlement holds Wells Fargo accountable for its actions that contributed into the 2008 financial crisis.
Wells Fargo CEO Tim Sloan said in a statement: “We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago. ”
The penalty comes as an additional burden for the San Francisco-based company, which paid a $1 billion fine in April for a settlement for auto loans and mortgage practices.
It was also revealed in 2016 that the bank opened millions of fake accounts without the knowledge of its customers and applied for 500,000 unauthorized credit card accounts to boost sales figures and meet sales targets.
Wells Fargo was fined in 2017 for nearly $200 million for those practices that dated to 2011, and the bank fired 5,300 employees and then-Chief Executive Officer John Stumpf was forced to retire.
