Wells Fargo Settles Mortgage-Backed Securities Class Action Case for $125M

Wells Fargo & Co. (WFC) has consented to pay $125 million to settle allegations that it misled investors about the risks involved in mortgage-backed securities. The plaintiffs in the class action securities lawsuit include a number of public pensions, including the New Orleans Employees’ Retirement System, Government of Guam Retirement Fund, Alameda County Employees’ Retirement Association, the General Retirement System of Detroit and the Louisiana Sheriffs’ Pension and Relief Fund. Wells Fargo is the biggest home lender in the country.

The securities in question were backed by mortgage loans that Wells Fargo or its affiliates had bought or originated, which were issued through Wells Fargo Asset Securities Corp. in July and October 2005 and September 2006. Per the investors’ securities fraud lawsuit, the bank misrepresented the quality of the loans in 28 offerings (they were accompanied by inflated appraisals), which resulted in artificially high ratings for the securities. Wells Fargo also allegedly neglected to disclose that it did not follow the proper underwriting standards. As a result, the true risks of investing in these mortgage-backed securities were not disclosed.

A judge must still approve the proposed MBS settlement. However, by agreeing to settle, Wells Fargo and the underwriters have been quick to emphasize that this is not an admission of wrongdoing.

Meantime, Wells Fargo must still deal with MBS lawsuits filed by federal home loan banks and individual investors in Illinois, California, and Indiana. The investment bank was one of several that were sued in 2009 over alleged securities violations related to the sale of $36 billion in mortgage pass-through certificates. It was just last month that Bank of America consented to pay investors $8.5 billion for their mortgage back-securities-related losses that the investment bank assumed after its acquisition of Countrywide Financial.

Wells Fargo settles MBS investors claims for $125 million, Housing Wire, July 8, 2011

Wells Fargo to Pay $125 Million to Settle Mortgage-Backed Securities Case, Bloomberg, July 7, 2011

More Blog Posts:
Allstate Files Mortgage-Backed Securities Fraud Lawsuit Against Morgan Stanley, Institutional Investor Securities Blog, July 6, 2011

Bank of America Cop. (BAC)’s Merrill Lynch a Defendant of Class-Action Mortgage-Backed Securities Lawsuit Against at Least 1,800 Investors, Institutional Investor Securities Blog, June 25, 2011

National Credit Union Administration Board Files $800M Mortgage-Backed Securities Fraud Lawsuits Against JP Morgan Securities, RBS Securities, and Other Financial Institutions, Institutional Investor Securities Blog, June 23, 2011

To find out if you have grounds for a mortgage-backed securities claim, contact our securities fraud attorneys today.