Wells Fargo Settles Mortgage-Backed Securities Claims filed by Pension Funds


Wells Fargo & Co. has agreed to pay $125 million to a group of pension funds to settle a class action filed by various public pension funds that purchased billions of dollars of mortgage-backed securities believing their money was in AAA-backed investments, according to a Wall Street Journal article by David Benoit entitled “Wells Fargo Settles Pension-Fund Mortgage Suit.” The proposed settlement is subject to court approval.

The plaintiffs alleged that Wells Fargo “routinely disregarded the underwriting guidelines” for mortgages that were the underlying assets of residential mortgage-backed securities purchased by the funds. Those securities plummeted when the mortgages defaulted.

The settlement applies to a specific set of 28 mortgage-backed security deals from 2006 and 2007 and represents only a fraction of Wells Fargo’s legal issues involving mortgages, according to the article.

Wells Fargo still faces other lawsuits by institutional investors such as Charles Schwab Corp. and various Federal Home Loan Banks each seeking billions of dollars from various banks because of their lack of appropriate standards in underwriting of mortgage-backed securities. Wells Fargo has not estimated the total potential losses from the suits, but could be facing $700 million in potential payouts, according to the article.

Other major banks face similar suits. Last week, Bank of America agreed to pay $8.5 billion in a settlement with several institutions, including BlackRock, Inc., MetLife Inc. and the Federal Reserve Bank of New York.

Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 45 occasions. Page Perry’s attorneys have extensive experience in representing investors in mortgage-backed securities matters. For further information, please contact us.