Wells Fargo

Wall Street Firms Disclose Government Investigations Of RMBS Activities

Bank of America, Citigroup, Wells Fargo, JP Morgan, and Goldman Sachs announced in their respective 2011 Forms 10-K filed with the SEC that they have received requests and subpoenas seeking documents, testimony and other information from government regulators including the SEC, DOJ Civil Division, state attorneys general, and bank regulators. These requests and subpoenas appear to be focused on issues relating to the sale and offering of mortgage-backed securities. Goldman Sachs, JP Morgan, and Wells Fargo also acknowledged that they have received Wells notices advising them of possible SEC civil or administrative action.  Bank of America.  Citigroup.  Wells Fargo.  JP Morgan.  Goldman Sachs.

Bear Stearns RMBS Trustee Sues EMC Mortgage to Enforce Repurchase Obligations

On September 13, 2011, Wells Fargo, acting as Trustee for the Bear Stearns Mortgage Funding Trust 2007-AR2, sued EMC Mortgage in Delaware Chancery Court. In its breach of contract claim, Wells Fargo alleges that EMC Mortgage breached the parties’ Pooling and Servicing Agreement and Mortgage Loan Purchase Agreement by refusing to repurchase hundreds of loans it sold to the Trust that did not meet stated minimum quality standards. According to Wells Fargo, EMC Mortgage has twice refused to fulfill its repurchase obligations to the Trust after receiving written notice regarding nonconforming loan. Complaint.

Wells Fargo and KPMG Agree to Settle Wachovia Section 11 Claims for $627 Million

On August 5, 2011, Wells Fargo and KPMG announced an agreement to settle with a class of investors asserting claims based on Wachovia’s 2006 acquisition of Golden West Financial Corp., a mortgage originator based in California. Wells Fargo has agreed to pay $590 million, and KPMG will pay $37 million, for a total settlement value of $627 million. In the suit, brought in 2008 in New York federal court, plaintiffs alleged Golden West originated loans that allowed borrowers to choose from a number of payment options, including payment for less than the interest due, called “Pick-A-Pay” loans. The complaint further alleged that when Wachovia acquired Golden West it began selling the “Pick-A-Pay” loans, as opposed to the traditional, less risky fixed-rate loans, without adequately disclosing the risks to investors or valuing these loans properly on its balance sheet. Plaintiffs brought claims under Sections 11, 12(a)(2), and 15 of the ’33 Act. The settlement was preliminarily approved by Judge Richard Sullivan of the Southern District of New York on August 9, 2011, and is set for a final settlement hearing in November 2011. Motion.

OCC Issues Consent Orders Against Eight Major Banks, Lender Processing Services, and MERSCORP for Foreclosure Practices

On April 13, 2011, the Office of the Comptroller of the Currency (“OCC”) announced consent orders and enforcement actions against eight national bank mortgage servicers (Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, and Wells Fargo) and two third-party servicers (Lender Processing Services and subsidiaries, and MERSCORP and subsidiaries (including MERS)). The enforcement actions require each servicer to correct claimed deficiencies identified in the OCC’s 2010 Fourth Quarter review, make improvements in servicing and foreclosure processing practices, establish oversight and control over third-party vendors (including outside legal counsel that provide default management or foreclosure services), and perform a multi-faceted review of foreclosure actions from January 1, 2009 to December 31, 2010 through an independent firm. The independent review must assess whether the servicers complied with federal and state laws regarding foreclosures and whether they caused any financial injury to borrowers. The servicers must also remedy all financial injuries to borrowers identified in the independent review. The consent orders do not preclude civil money penalties, which the OCC may assess at a future date. OCC Press Release. Interagency Review of Foreclosure Practices.

Wells Fargo Pays $11.2 Million to Settle SEC Investigation Relating to Alleged ’33 Act Violations by Wachovia in Sales of CDOs

On April 5, 2011, Wells Fargo agreed to pay $11.2 million to resolve SEC regulatory claims that Wachovia, acquired by Wells Fargo in 2008, improperly sold two CDOs tied to the performance of certain RMBS. The SEC alleged that Wachovia charged “undisclosed excessive markups” to the Zuni Indian Tribe and other investors and falsely claimed that assets purchased from an affiliate at above-market prices were arm’s-length purchases at fair market prices. Settlement Order. The $11.2 million settlement consists of $6.75 million in disgorgement and $4.45 million in civil penalties. Wells Fargo resolved the matter without admitting or denying wrongdoing by Wachovia. Wells Fargo SEC Settlement Order.

Pension Funds Move for Class Certification in RMBS Suit Against Wells Fargo

On February 11, 2011, lead plaintiffs moved for class certification in an action pending against Wells Fargo Bank in the Northern District of California that alleges Wells Fargo violated Sections 11 and 15 of the Securities Act in connection with the sale of more than $27.3 billion in RMBS. Lead plaintiffs, a number of pension funds, allege that the loans underlying the RMBS were riskier than disclosed in the offering documents. They seek certification of a class of all those who were damaged by buying or acquiring RMBS in 17 different offerings that occurred in 2006 and 2007 were traceable to three Wells Fargo registration statements from 2005 and 2006. Lead plaintiffs also moved to appoint Bernstein Litowitz Berger & Grossmann LLP as class counsel. Complaint.