Wells Fargo to pay Freddie Mac $780 million to settle mortgage claims

Tue Oct 1, 2013 1:43am EDT
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By Jonathan Stempel

(Reuters) - Wells Fargo & Co said on Monday it will pay $780 million in cash to Freddie Mac to resolve substantially all repurchase liabilities on home loans sold to the government-controlled mortgage company prior to 2009.

The largest U.S. mortgage lender said the settlement was reached on September 27 and totaled $869 million before adjusting for credits related to prior loan repurchases.

Wells Fargo announced the settlement five days after Citigroup Inc agreed to pay Freddie Mac $395 million to settle similar claims over roughly 3.7 million mortgages sold from 2000 to 2012.

Citigroup is the third-largest U.S. bank by assets, while Wells Fargo ranks fourth.

Wells Fargo said the cost of its agreement is covered by existing reserves.

On August 7, the San Francisco-based lender estimated a probable $2.2 billion loss over claims it breached representations and warranties in the sale of mortgage loans.

It is unclear how much of the latest settlement related to Wachovia Corp, which Wells Fargo bought at the end of 2008.

Freddie Mac and larger rival Fannie Mae, which both received federal bailouts in 2008, have pushed banks to buy back mortgages that soured during the nation's housing downturn.   Continued...

A Wells Fargo sign is seen outside a banking branch in New York July 13, 2012. REUTERS/Shannon Stapleton