San Francisco-based Wells Fargo & Co. agreed on Wednesday to pay a US$2.1 billion fine to settle allegations it misrepresented the types of mortgages it sold to investors during the housing bubble and subsequent financial crisis.
The amount is relatively smaller than the fines Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and other big banks paid in the years following the financial crisis to settle similar allegations. Wells Fargo was one of the last remaining big banks to settle charges related to its role in the subprime mortgage crisis.
The fine is unrelated to the more recent scandals that have plagued Wells Fargo, such as the opening of millions of fake accounts for customers without their authorization in order to meet unrealistic sales quotas.
The government accused Wells Fargo and many other big banks of understating the risk and quality of the mortgages they sold to investors at the height of the housing bubble, between 2005 and 2007. These investors bought up tens of billions of dollars in mortgages from Wells Fargo and other banks, and experienced massive losses when borrowers failed to repay and housing prices collapsed nationwide.
Bank of America paid a US$5 billion fine to authorities in 2014 for similar allegations, and Citigroup paid a US$4 billion fine.
Wells Fargo said in a statement it was “pleased to put behind us these legacy issues” and said it had previously set aside the money to cover the settlement with the Justice Department.