Wells Fargo's agreement to pay Fannie Mae $591 million to resolve repurchase claims marks the end of Fannie's efforts to receive reimbursement on defective loans it bought from private lenders during the height of the housing boom.
Including the Wells settlement, Fannie has collected nearly $14 billion from eight mortgage lenders since the start of 2013.
Bank of America (BAC), JPMorgan Chase (JPM) and Citigroup (NYSE: C) were among the lenders that agreed to pay hefty sums in 2013 in order to resolve repurchase claims on mortgages originated and sold to the government-sponsored entity between 2005 and 2008. Fannie Mae devoted much of the year to reviewing such loans for underwriting defects that could spur repurchase requests, according to a Monday press release.
"We have closed out our legacy repurchase reviews with this agreement with Wells Fargo," Timothy Mayopoulos, Fannie's president and chief executive, said in a new release Monday. "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."
The largest settlement agreement was with Bank of America, which said in January that it would pay $10.3 billion to resolve repurchase claims. The payment resolved repurchase issues and transfer of servicing rights on 941,000 loans, many of which were originated by Countrywide Financial, the large mortgage lender that Bank of America acquired in 2008.
Bank of America also bought back 30,000 loans and paid $1.3 billion for servicing obligations as part of the agreement.
The agency's repurchase agreements picked up in the second half of the year. Citigroup agreed in July to pay $968 million to resolve repurchase issues; in October, Fannie Mae reached a $373 million agreement with SunTrust Banks (STI) and a $670 million agreement with JPMorgan Chase in October; November brought a $121.5 million agreement with Flagstar Bancorp (FBC) of Troy, Mich.; and PNC Financial Services Group (PNC) and HSBC Bank USA reached settlements of $140 million and $83 million, respectively, in December.
In a news release Monday, Wells said that the settlement "resolves substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to Jan. 1, 2009." Wells inherited many of those problem loans when it acquired Wachovia on that date.
Wells said the agreement with Fannie was adjusted for a $50 million credit related to prior repurchases, resulting in a one-time cash payment of roughly $541 million. As of Sept. 30, Wells had fully accrued for the cost of the settlement.