Wells Fargo clears two mortgage-related consent orders from the Fed

Federal consent orders tied to mortgage servicing and lending have been lifted

Wells Fargo clears two mortgage-related consent orders from the Fed

The Federal Reserve has lifted two mortgage-related enforcement orders against Wells Fargo, the Fed said Tuesday. However, the bank remains under a strict asset cap that continues to limit its ability to expand.

The orders, originally issued in 2011, were tied to residential mortgage servicing, foreclosure practices, and improper mortgage lending by a former Wells Fargo subsidiary. While their termination signals improvements in compliance and oversight, the bank is still operating under significant regulatory restrictions.

“Wells Fargo is a different company today,” said CEO Charlie Scharf. “The resolution of these two longstanding Federal Reserve consent orders is another indication that our team is establishing the right processes and controls to meet our regulators’ and our own expectations.”

The bank has been working for years to address regulatory concerns stemming from multiple scandals. Just last week, the Consumer Financial Protection Bureau (CFPB) terminated a separate 2022 order, which had required Wells Fargo to pay nearly $4 billion for widespread mismanagement in its auto lending, mortgage lending, and consumer deposit accounts.

Since 2019, Wells Fargo’s regulators have closed nine consent orders. However, the Federal Reserve’s $1.95 trillion asset cap, which has restricted the bank’s growth since 2018, remains. That enforcement action stems from Wells Fargo’s notorious fake accounts scandal, in which employees, under extreme sales pressure, created millions of unauthorized accounts between 2002 and 2016.

While the recent consent order terminations are a step forward, the Fed clarified that its 2018 enforcement action remains in effect. Wells Fargo cannot expand its assets beyond the cap until regulators are satisfied that systemic risk and governance issues have been fully addressed.

“The termination of these enforcement actions does not affect the board's 2018 enforcement action, which addressed widespread compliance issues by restricting Wells Fargo's growth, and remains effective,” the Fed said in a statement.

The end of the asset cap, however, may be on the horizon. In November, Reuters reported that Wells Fargo was in the “last stages of a process to pass regulatory tests,” citing unnamed sources who suggested the restriction could be lifted in the first half of 2025.

Background on 2011 consent orders

The orders removed on Tuesday were tied to oversight failures in Wells Fargo’s mortgage division.

The April 2011 consent order required Wells Fargo to make substantial revisions to its mortgage servicing and foreclosure practices.

Three months later, the Fed fined the bank $85 million for steering qualified borrowers into costly subprime loans and falsifying income data on mortgage applications. The bank was also required to compensate affected borrowers and improve oversight of mortgage loan officers and underwriters. While Wells Fargo did not admit wrongdoing, regulators mandated stronger internal controls.

Read next: Wells Fargo asset cap to last all year, says CEO

Despite these improvements, the bank remains under five consent orders, including the 2018 action limiting its asset size. Wells Fargo’s largest employment hub is in Charlotte, where it has about 27,000 employees.

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