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Wells Fargo hit with $2B penalty for misrepresenting quality of loans used in RMBS

Jaclyn Jaeger | August 2, 2018

The Department of Justice on Aug. 1 announced that Wells Fargo and several of its affiliates will pay a $2.09 billion civil penalty based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet the quality that Wells Fargo represented.

Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo. “This settlement holds Wells Fargo accountable for actions that contributed to the financial crisis,” said Acting Associate Attorney General Jesse Panuccio.  

The Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) authorizes the federal government to seek civil penalties against financial institutions that violate various predicate criminal offenses, including wire and mail fraud. The United States alleged that, in 2005, Wells...

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