Wells Fargo & Co. has reached an agreement on government-sponsored enterprise repurchase demands. Although the company is the largest home lender, its GSE settlement costs are smaller than competitors’.
The San Francisco-based firm disclosed Monday that it has reached an agreement with the Federal National Mortgage Association.
The settlement resolves substantially all repurchase liabilities tied to loans originated prior to Jan. 1, 2009, and sold to Fannie Mae.
However, Wells Fargo will remain liable on some contractual responsibilities under the resolution agreement.
Wells Fargo will pay Washington, D.C.-based Fannie $591 million as part of the agreement. After adjustments for previous repurchases, the fourth-quarter payment will be $541 million.
“We have closed out our legacy repurchase reviews with this agreement with Wells Fargo,” Fannie Mae President and Chief Executive Officer Timothy J. Mayopoulos said in a statement. “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.”
Wells Fargo said the expense has already been fully accrued.
In October, Wells Fargo agreed to pay Freddie Mac $869 million in a similar settlement.
In addition to the repurchase settlements, Wells Fargo agreed last month to a $335 million settlement with the Federal Housing Finance Agency to resolve claims about the quality of mortgage-backed securities sold to Fannie and Freddie.
The combined $1.8 billion price tag of the three settlements at Wells Fargo, the biggest U.S. residential lender, pales in comparison to those at two of its biggest competitors.
In addition to a $1.1 billion settlement that JPMorgan Chase & Co. reached with FHFA in October to resolve repurchase demands from Fannie and Freddie on pre-2009 vintages, Chase paid $4.0 billion to resolve alleged misrepresentations on private-label MBS sales to the pair of secondary lenders.
Wells Fargo’s previously formidable rival, Bank of America Corp., settled outstanding repurchases with Fannie in January for $3.6 billion and the repurchase of $6.8 billion in loans. BofA agreed earlier this month to settle repurchases with Freddie for $404 million.
While it has yet to settle FHFA’s lawsuit over private-label MBS sold to Fannie and Freddie, Fitch Ratings estimates a settlement will cost BofA between $5 billion and $8 billion,
