Wells Hands Over Mortgage Records
JEAN EAGLESHAM, Wall Street Journal, May 24, 2012, link
Wells Fargo WFC +0.03% & Co. has handed over hundreds of emails and other documents related to its mortgage-backed securities business to the Securities and Exchange Commission after being taken to court, according to a person familiar with the matter.
The decision by the fourth-biggest U.S. bank to bow to the SEC’s demands for the information resolves a legal spat.
“Wells Fargo continues to believe its disclosures in offering documents pertaining to residential mortgage-backed securities containing Wells Fargo mortgages were proper and appropriate,” a spokeswoman for Wells Fargo said.
ReutersWells Fargo provided the SEC with hundreds of emails and other documents related to its mortgage-backed-securities business.
A spokesman for the SEC declined to comment.
The SEC in March took the unusual step of filing an enforcement action in the U.S. District Court in San Francisco to try to force Wells Fargo to produce documents related to its residential mortgage-backed securities business.
A federal judge in March denied the enforcement order, telling the SEC and Wells Fargo to sort out the issue between themselves.
But the legal action gave a rare peek into the mountains of information being amassed by the SEC as it probes Wall Street’s packaging and selling of these securities. SEC investigators have issued a total of more than 300 subpoenas or document requests to Wall Street firms and others as part of that investigation, officials said Thursday.
Wells Fargo has received six subpoenas, and they show the type of information the agency seeks as it looks to build a case.
At the heart of the demands are data on the pools of loans underlying nearly $60 billion of securities sold by Wells Fargo to investors from September 2006 through early 2008.
The SEC said the subpoenas asked for information on the guidelines on loan quality used by the underwriters to vet the loan pools before they were bundled into securities, the outcomes of those due-diligence checks and the prospectuses used to sell the investments.
The details of its probe set out in the subpoena enforcement action show why the SEC considers this information so important. The SEC said that for “most” of the securities offerings, the checks on samples of the pools found certain loans failed to meet the quality guidelines and were removed.
But the agency added it did “not appear that Wells Fargo took any steps to address similar deficiencies” in the rest of the loans in the pool, before selling them to investors.
The SEC in February told Wells Fargo it planned to file civil charges of securities fraud against it.
The agency also told “two individuals associated with” the Wells Fargo securities that it planned to file civil charges, according to the subpoena enforcement notice. It didn’t name the individuals.
One of the agency’s subpoenas asked for information on the salaries, bonuses and compensation for two Wells Fargo employees, according to the enforcement notice. It didn’t say if the SEC intended to use this information to work out the levels of penalties to seek from those two individuals.