Wells Fargo has agreed to pay $108 million to the Federal government to settle long-time allegations that it improperly issued VA refinance loans that weren’t actually eligible for Veterans Administration backing. The government filed the claim in 2006, seeking compensation for the VA, which took losses when many of the loans in question defaulted.
According to the suit, the government alleged that some of Wells Fargo’s VA Interest Rate Reduction Refinance Loans (IRRRLs) were not eligible for VA guarantees because the bank charged certain fees at the time of origination.
Though the bank will pay the $108 million to settle the claim, Wells Fargo denies the government’s allegations. The bank settled a related class action suit in 2011, compensating veterans who were issued a VA IRRRL between 2004 and 2010 to make up for the origination fees charged at the time. In total, the suit cost Wells Fargo $10 million in refunds, with about 60,000 mortgagees receiving $175 each.
This new settlement, according to Wells Fargo CEO Tim Sloan, will finally close the door on the issue.
“More than six years ago, when questions about fees on Veterans Administration refinance loans were raised, we resolved those concerns by improving our internal controls and made compensation available to VA customers who closed a refinance before that time,” Sloan said. “Settling this longstanding lawsuit allows us to put the matter behind us and continue to focus on serving customers and rebuilding trust with our stakeholders. We are committed to serving the financial health and well-being of veterans, and we will continue to honor that commitment now and in the future.”
The two VA-related suits aren’t the only legal troubles Wells Fargo has faced as of late. Last week, the bank revealed it would pay out $80 million in remediation funds for forcing auto insurance policies on customers, and before that, the bank was accused of opening more than 2 million unauthorized accounts in its customers’ names.
See Wells Fargo’s full response to the Federal government’s suite at WellsFargo.com.