Wells Fargo 2011 Annual Report Download - page 184

Note 15: Legal Actions (continued)
Securities Corp., et al., were filed in the Superior Court for the
State of California, San Francisco County against a number of
defendants, including Wells Fargo Bank, N.A. and Wells Fargo
Asset Securities Corporation. As against the Wells Fargo entities,
the new cases assert opt out claims relating to the claims alleged
in the Mortgage-Backed Certificates Litigation.
On October 15, 2010, three actions, captioned Federal Home
Loan Bank of Chicago v. Banc of America Funding
Corporation, et al. (filed in the Cook County Circuit Court, State
of Illinois); Federal Home Loan Bank of Chicago v. Banc of
America Securities LLC, et al. (filed in the Superior Court of the
State of California for the County of Los Angeles); and Federal
Home Loan Bank of Indianapolis v. Banc of America Mortgage
America Securities, Inc., et al. (filed in the Superior Court of the
State of Indiana for the County of Marion), named multiple
defendants, described as issuers/depositors, and
underwriters/dealers of private label mortgage-backed
securities, in an action asserting claims that defendants used
false and misleading statements in offering documents for the
sale of such securities. The Bank of Chicago asserts that it
purchased approximately $4.2 billion and the Bank of
Indianapolis asserts that it purchased nearly $3 billion of such
securities from the defendants. Plaintiffs seek rescission of the
sales and damages under state securities and other laws and
Section 11 of the Securities Act of 1933. Wells Fargo Asset
Securities Corporation, Wells Fargo Bank, N.A. and Wells Fargo
& Company were named among the defendants.
On April 20, 2011, a case captioned Federal Home Loan of
Boston v. Ally Financial, Inc., et al., was filed in the Superior
Court of the Commonwealth of Massachusetts for the County of
Suffolk. The case names, among a large number of parties,
Wells Fargo & Company, Wells Fargo Asset Securitization
Corporation and Wells Fargo Bank, N.A. as parties and contains
allegations substantially similar to the cases filed by the other
Federal Home Loan Banks.
On April 28, 2011, a case captioned The Union Central Life
Insurance Company, et al. v. Credit Suisse First Boston
Securities Corp., et al., was filed in the U.S. District Court for the
Southern District of New York. Among other defendants, it
names Wells Fargo Asset Securitization Corporation and
Wells Fargo Bank, N.A. The case asserts various state law fraud
claims and claims for violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 on behalf of three insurance
companies, relating to offerings of mortgage-backed securities
from 2005 through 2007.
In addition, there are other mortgage-related threatened or
asserted claims by entities or investors where Wells Fargo may
have indemnity or repurchase obligations, or as to which it has
entered into agreements to toll the relevant statutes of
limitations.
MORTGAGE FORECLOSURE DOCUMENT LITIGATION Eight
purported class actions and several individual borrower actions
related to foreclosure document practices were filed in late 2010
and in early 2011 against Wells Fargo Bank, N.A. in its status as
mortgage servicer or corporate trustee of mortgage trusts. The
cases have been brought in state and federal courts. Five of the
class actions have been dismissed or otherwise resolved. Of the
individual borrower cases, the majority are filed in state courts
in California and Ohio. The actions generally claim that Wells
Fargo submitted "fraudulent" or "untruthful" affidavits or other
foreclosure documents to courts to support foreclosures filed in
the state. Specifically, plaintiffs allege that Wells Fargo signers
did not have personal knowledge of the facts alleged in the
documents and did not verify the information in the documents
ultimately filed with courts to foreclose. Plaintiffs attempt to
state legal claims ranging from wrongful foreclosure to deceptive
practices or fraud and seek relief ranging from cancellation of
notes and mortgages to money damages.
MORTGAGE RELATED REGULATORY INVESTIGATIONS On
April 13, 2011, Wells Fargo Bank, N.A. entered into a Consent
Order with the OCC and Wells Fargo & Company entered into a
Consent Order with the Board of Governors of the Federal
Reserve System in connection with Wells Fargo’s mortgage
foreclosure practices. The Consent Orders require Wells Fargo to
develop and implement certain compliance programs and to take
other remedial steps, which Wells Fargo is doing. On
February 9, 2012, the OCC and Federal Reserve announced that
they had also imposed civil money penalties of $83 million and
$85 million, respectively, related to the Consent Orders. These
penalties will be satisfied through payments made under a
separate simultaneous settlement in principle, announced on the
same day, among the Department of Justice (DOJ), a task force
of Attorneys General from 49 states, other government entities,
Wells Fargo and four other mortgage servicers related to
mortgage servicing and foreclosure practices. Under the
settlement in principle, Wells Fargo agreed to the following
commitments, comprised of three components totaling
$5.3 billion:
Consumer Relief Program For qualified borrowers with
financial hardship and a loan owned and serviced by Wells
Fargo, a commitment to provide $3.4 billion in aggregate
consumer relief and assistance programs, including
expanded first and second mortgage modifications that
broaden the use of principal reduction to help customers
achieve affordability, an expanded short sale program that
includes waivers of deficiency balances, forgiveness of
arrearages for unemployed borrowers, cash-for-keys
payments to borrowers who voluntarily vacate properties,
and “anti-blight” provisions designed to reduce the impact
on communities of vacant properties. As of
December 31, 2011, the expected impact of the Consumer
Relief Program was covered in our allowance for credit
losses and in the nonaccretable difference relating to our
purchased credit-impaired residential mortgage portfolio.
Refinance Program For qualified borrowers with little or
negative equity in their home and a loan owned and serviced
by Wells Fargo, an expanded first-lien refinance program
commitment estimated to provide $900 million of aggregate
payment relief over the life of the refinanced loans. The
Refinance Program will not result in any current-period
charge as its impact will be recognized over a period of years
in the form of lower interest income as qualified borrowers
benefit from reduced interest rates on loans refinanced
under the program.
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