Wells Fargo Said to Settle FHFA Claims for Less Than $1 Billion

Wells Fargo & Co. agreed to pay less than $1 billion to settle Federal Housing Finance Agency claims it sold faulty mortgage bonds to Fannie Mae and Freddie Mac, according to a person briefed on the deal.

The bank’s accord with the FHFA, which regulates the government-backed mortgage-finance firms, was subject to a confidentiality agreement, the person said, asking not to be named because of those terms. San Francisco-based Wells Fargo said in a May filing that it had settled Fannie Mae’s claims over mortgage bonds, and that the payment, which it didn’t specify, was covered by reserves.

Mary Eshet, a bank spokeswoman, and Stefanie Johnson at the FHFA declined to comment.

Investors and analysts have sought to estimate what government claims banks have yet to face over faulty mortgage bonds after JPMorgan Chase & Co., the biggest U.S. lender, entered talks with the Justice Department over a proposed $13 billion settlement of state and federal probes. The FHFA is squeezing banks to repay losses that taxpayers were forced to cover when the U.S. took control of the two failing mortgage-finance companies in the wake of 2008’s credit crisis.

Part of JPMorgan’s deal was finished with the FHFA last week, as the New York-based firm agreed to pay $5.1 billion to resolve claims it mis-sold mortgage bonds to Fannie Mae and Freddie Mac, as well as defective homes loans that they packaged into their own securities.

Fitch Estimates

Bank of America Corp. may have to pay $5 billion to $8 billion to settle the FHFA’s suit against it after JPMorgan’s deal set “a relatively high bar,” Fitch Ratings said this week. An FHFA lawsuit against Bank of America had cited about $57 billion of mortgage-backed securities, compared with about $33 billion in its case against JPMorgan, Fitch said.

The Financial Times reported earlier today on Wells Fargo’s confidential settlement. Citigroup Inc. and General Electric Co. also previously paid undisclosed amounts to resolve the regulator’s complaints.

UBS AG, Switzerland’s largest bank, agreed in July to pay $885 million to settle claims it misrepresented the quality of the loans backing $4.5 billion in residential mortgage bonds it sponsored and $1.8 billion of third-party mortgage bonds sold to Fannie Mae and Freddie Mac.