Wells Fargo offers settlement over mortgage-backed securities
Wells Fargo & Co. agreed to pay $125 million to investors in its mortgage-backed securities who alleged that before the Great Recession hit, they were misled about how much equity the borrowers had in their homes.
The proposed settlement, filed Wednesday in federal court in San Jose, ended consolidated lawsuits filed by the pension funds of Alameda County, Detroit, New Orleans, Guam, the Louisiana sheriffs and other plaintiffs.
At issue were mortgage-backed securities — financial instruments derived from a pool of mortgages — whose value depended on borrowers’ payments on loans made at the peak of the housing bubble in 2006 and 2007.
Certain other claims over mortgage securities filed by Charles Schwab Corp. and the Federal Home Loan Banks of Chicago and Indianapolis are excluded from the class, Wells Fargo has said in regulatory filings.
The litigation named as defendants Wells Fargo and about 20 trusts holding mortgages backing $8 billion in securities, along with various Wall Street banks and credit-rating agencies involved in issuing the mortgage bonds.
The proposed settlement, which still requires judicial approval, did not include any admission of wrongdoing by Wells Fargo. A spokesman for the San Francisco bank said the intent was to avoid the expense and risk of further litigation.
