Wells Fargo & Co. has agreed to settle allegations that it originated government-guaranteed loans for veterans that should not have been made.
The San Francisco-based bank-holding company issued a statement Thursday saying the agreement settles a lawsuit originally filed in 2006.
At issue are
Department of Veterans Affairs Interest Rate Reduction Refinance Loans originated by Wells Fargo that shouldn’t have been eligible for VA guarantees because of certain fees charged to the borrowers at origination.
The lawsuit, which was unsealed in 2011, sought compensation to the federal government to cover claims made to VA after the loans defaulted.
Wells said while it denies allegations made in the complaint, it will pay $108 million to the U.S. government to resolve the claims.
Settlement costs were previous accrued.
Wells highlighted a separate class-action settlement in 2011 in which it compensated all veterans who obtained an interest-rate reduction refinance between January 2004 and October 2010 even if borrower fees weren’t in question.
“More than six years ago, when questions about fees on Veterans Administration refinance loans were raised, we resolved those concerns by improving our internal controls and made compensation available to VA customers who closed a refinance before that time,” Wells Fargo Chief Executive Officer Tim Sloan said in the news release. “Settling this longstanding lawsuit allows us to put the matter behind us and continue to focus on serving customers and rebuilding trust with our stakeholders.”
In addition to being the biggest U.S. mortgage lender, Wells Fargo claims it is the largest VA lender and has been for several years. It claims a VA market share of 21 percent since 2001.
The latest settlement comes on the heels of a lawsuit filed by a former employee alleging
the financial institution falsified records and charged borrowers for rate-lock extensions even though it was responsible for the delays.
