Wells Fargo to Pay $1.2 Billion Over Faulty Mortgages

By Chelsey Dulaney 

Wells Fargo & Co. said Wednesday that it has agreed to pay $1.2 billion to settle a long-running suit that accused the company of "reckless" lending and leaving a federal insurance program to pick up the tab.

The agreement settles civil charges with the U.S. Justice Department, two U.S. attorneys and the Department of Housing and Urban Development

The government sued Wells Fargo in 2012, accusing the U.S. mortgage lender of engaging in "regular practice of reckless origination and underwriting" of government-backed loans. The action was one of several brought under the Federal False Claims Act against a lender accused of bilking the Federal Housing Administration, which has historically backed loans to first-time buyers and those with low incomes.

The government said the mortgages were made under the Federal Housing Administration lending program from 2001 to 2010.

As a result of the settlement, Wells Fargo said it has added to its legal accrual for 2015, which it reported results for on Jan. 15. That has reduced its profit for last year by $134 million, or 3 cents a share.

The company's 2015 profit is now $22.9 billion, or $4.12 a share.

Wells Fargo noted that the settlement isn't yet finalized.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

February 03, 2016 08:46 ET (13:46 GMT)

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