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Wells Fargo mortgage lending draws new scrutiny, as bank raises reserves to deal with litigation costs

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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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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