By Jonathan Stempel
Dec 30 (Reuters) - Wells Fargo & Co will pay a net $541 million to Fannie Mae to settle claims over defective home loans, completing the government-controlled mortgage company’s efforts to have banks buy back troubled loans made before the financial crisis.
Fannie Mae said on Monday it has reached settlements worth roughly $6.5 billion over loan buybacks with eight banks, including Wells Fargo, the nation’s largest mortgage lender and fourth-largest bank by assets.
The settlements include a $3.6 billion accord in January with Bank of America Corp over loans from that bank and the former Countrywide Financial Corp. Fannie Mae Chief Executive Timothy Mayopoulos was once general counsel at Bank of America.
It also includes a $968 million accord in July with Citigroup Inc.
In the Wells Fargo settlement, the San Francisco-based bank will pay Fannie Mae $541 million in cash after adjusting for credits from prior repurchases. Before adjustments, the settlement totaled $591 million.
The accord resolves substantially all repurchase claims against Wells Fargo over loans sold to Fannie Mae that were made before 2009.
“We have closed out our legacy repurchase reviews with this agreement,” Mayopoulos said in a statement. “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 agreed in September to pay a net $780 million to the smaller Freddie Mac to resolve similar repurchase claims. It said it had set aside sufficient funds for the Fannie Mae settlement.
Fannie Mae and Freddie Mac were directed by its regulator, the Federal Housing Finance Agency (FHFA), to reduce outstanding loan repurchase demands by year end, and have been reaching many agreements with individual lenders.
Banks can be forced to buy back home loans if representations and warranties concerning the underwriting and whether borrowers could afford to make payments prove false.
Freddie Mac did not immediately respond on Monday to a request for comment on its repurchase efforts.
The FHFA is also pursuing lawsuits against many banks over mortgage securities sold to Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac own or guarantee two-thirds of U.S. home loans. The government seized them on Sept. 7, 2008 and put them into a conservatorship. As of last month, taxpayers had nearly broken even on the bailout.