Today, Wells Fargo (NYSE:WFC) announced it agreed to a $591 million settlement with the Federal National Mortgage Association, or Fannie Mae (OTC:FNMA). In separate news, Flagstar Bank (NYSE:FBC) announced today it had settled for $10.8 million with Federal Home Loan Mortgage Corporation, aka Freddie Mac (OTC:FMCC), for similar mortgage repurchase claims.
The Wells Fargo-Fannie Mae settlement will resolve all repurchase claims by Fannie Mae against Wells Fargo for mortgages the bank originated before January 2009. A repurchase stipulation is written into a contract and typically comes into question if the buyer, in this case Fannie Mae, believes that the quality of the loans sold was not up to par with agreed upon standards.
"We have closed out our legacy repurchase reviews with this agreement with Wells Fargo," said Fannie Mae's President and CEO Timothy Mayopoulos in a statement today. "This agreement represents a fitting conclusion to our year of hard work to put legacy issues in the rear view mirror and begin 2014 focused on improving the future of housing finance."
Wells Fargo noted that it had already fully accumulated the amount for the settlement by the end of the third quarter of this year. As a result of the settlement, and adjustments for existing credits, Wells Fargo will pay Fannie Mae approximately $541 million. In September, Wells Fargo also settled with Freddie Mac for repurchase claims. The amount of that settlement stood at $869 million, and it resulted in a cash payout of $780 million.
In separate news, Flagstar Bank announced today that it settled for $10.8 million with Freddie Mac to cover loans sold to Freddie Mac between 2000 and 2008.
"This agreement is another positive step for Flagstar in further reducing the Company's risk profile while supporting improved performance," said Flagstar's President and CEO Alessandro (Sandro) DiNello. "We believe that our accomplishments in 2013 have positioned Flagstar for sustainable long-term growth in 2014 and beyond."
Flagstar settled with Fannie Mae last month, announcing Nov. 6 it had "entered into an agreement with Fannie Mae to resolve repurchase requests and obligations associated with loans originated between January 1, 2000 and December 31, 2008, for a total resolution amount of $121.5 million." After adjustments, the bank was set to pay $93.5 million to Fannie Mae.