bizjournals.com | November 6, 2016
By Riley McDermid
San Francisco-based Wells Fargo is talking to multiple regulators about investigations in mortgage lending, and the bank has raised reserves for possible litigation losses related to its fake-accounts scandal to as much as $1.7 billion, it said in a filing this week.
In the filing, Wells Fargo said it has received “potential theories of liability” from the Residential Mortgage-Backed Securities Working Group of the Financial Fraud Enforcement Task Force, which is concerned about some of the bank's mortgage practices.
“Other financial institutions have entered into settlements with these agencies, the nature of which related to the specific activities of those financial institutions, including the imposition of significant financial penalties and remedial actions,” Wells Fargo said in the 10-Q filing, which the bank sent to the San Francisco Business Times.
The Wall Street Journal reports that sources familiar with the matter say Wells Fargo has given documents to the Justice Department related to its mortgage practices, but that the matter has not progressed.
The same filing confirms that the Securities and Exchange Commission has begun an investigation into whether Wells Fargo violated investor disclosures amidst a scandal prompted by illegal and aggressive sales tactics.
The SEC declined to comment when reached by the Business Times on Thursday.
Wells Fargo (NYSE:WFC) agreed to pay $185 million to settle charges that as many as 2 million unauthorized bank and credit card accounts were opened for customers by employees aiming to make sales goals. The bank fired about 5,300 employees over three years for engaging in the fraudulent activity and the furor over the practice led to the ouster of CEO John Stumpf.
Sens. Elizabeth Warren (D., Mass.), Jeff Merkley (D., Ore.) and Robert Menendez (D., N.J.) sent a letter to the SEC in September requesting the agency take a closer look at whether Wells Fargo misled investigators as it became aware of the cross-selling tactics. The SEC has now begun an investigation in response to those requests.
Earlier this week, the main federal bank regulator sent letters this week to most of the country's large and mid-sized banks asking for information about their sales practices and how they structure incentives. The Office of the Comptroller of the Currency said its review will begin this month.
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