Ten years after faulty mortgages upended the global financial system, Wells Fargo & Co. agreed to pay $2.09 billion to settle a U.S. probe into its creation and sale of loans that contributed to the disaster.
The long-anticipated penalty, announced Wednesday, is in line with what some analysts had predicted and smaller than sanctions borne by some of the bank’s competitors. But the case offers a new look behind the scenes at decisions made inside one of the nation’s largest home lenders before the crisis — and the evidence that executives saw of mounting trouble.
Investors including federally insured financial institutions ended up suffering billions of dollars in losses on securities that contained home loans from Wells Fargo, the Department of Justice said in a statement announcing the accord. The probe had focused on debts in which borrowers were allowed to state their incomes, without providing proof.
“Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” Alex Tse, the acting U.S. attorney for the Northern District of California, said in the statement. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”