Although it’s largest competitors chose to settle with Fannie Mae and Freddie Mac, Wells Fargo (NYSE: WFC) has chosen to buck that trend.
Howard Atkins, Chief Financial Officer of Wells Fargo said such settlements as those reached by Bank of America (NYSE: BAC) might not be as generous as thought. BofA reached agreements with Fannie Mae and Freddie Mac that prompted one analyst to describe them as gifts and a California congressional representative to dub them a “backdoor bailout.”
On December 31, BofA paid $2.6 billion to the federal mortgage giants to settle their claims. The agencies wanted BofA to buy back thousands of loans BofA’s Countrywide Financial Corp. had sold them that may have contained false or improper documentation. BofA agreed to pay the $2.6 billion to cap its liability. BofA bought Countrywide in 2008 for $2.5 billion.
Atkins told Bloomberg News on Wednesday “The quality of our securitizations was of a much higher caliber than all of the other large bank peers. It doesn’t make sense for us to pay up to get rid of the remaining small amount of problems we have.”
Fighting a government entity is usually an exercise in futility. Wells Fargo could strive to drag this out a few more quarters in hopes of lowering the number of loans needed to buy back, but many speculate that they will eventually agree to a reduced value to put this behind them.
