Written by The Business Journal Staff
(AP) — Wells Fargo said it has agreed to pay $1.2 billion to settle a government lawsuit related to its Federal Housing Administration home mortgage program.
The bank said Wednesday it reached the agreement earlier this week with the U.S. Department of Justice, two attorneys general and the Department of Housing and Urban Development. The company said the agreement still needs to be approved.
The Department of Justice declined to comment.
In 2012, the federal government sued Wells Fargo accusing the bank of misrepresenting the quality of thousands of loans in order to be eligible for federal loan insurance. The government wanted to recover money that the FHA paid after borrowers defaulted on Wells Fargo mortgage loans.
Wells Fargo, the country’s largest mortgage lender, said the settlement is related to the 2012 case and other pending or potential cases.
The company said that because of the settlement, the bank will reduce its 2015 net income by $134 million, or 3 cents per common share, to $22.9 billion, or $4.12 per common share.
Shares of Wells Fargo & Co., based in San Francisco, fell $1.57, or 3.2 percent, to $46.88 in afternoon trading.