Wells Fargo Bank has settled two lawsuits with BlackRock, Pacific Investment Management Co. LLC and other plaintiffs over the bank’s role as trustee for residential mortgage-backed securities trusts.
The bank will pay $43 million and denies the claims in the litigation, under the terms of the agreement. Separate from the settlement amount the bank is paying, up to $70 million will be released from trust reserve accounts created in connection with the litigation.
“Following more than four years of litigation, including fact and expert discovery, we concluded that this agreement provides a fair and reasonable resolution of the claims,” said Pimco, BlackRock and the other institutional investor plaintiffs through their counsel, Timothy DeLange of Bernstein Litowitz Berger & Grossmann LLP. “We appreciate Wells Fargo’s professionalism in reaching this agreement and commend their efforts to work with certificate holders to resolve the litigation. While we believe the claims are meritorious, the settlement provides an immediate and concrete benefit for class members, while bringing the litigation to a close.”
The settlement also resolves a related action seeking declaratory relief against Wells Fargo, as well as claims by Wells Fargo against certain investment advisors. The securities were created over 10 years ago. Federal and state cases alleging similar claims filed that other institutional investors weren’t a part of the settlement.
The agreement, which is subject to approval by the court, resolves claims regarding the fulfillment of Wells Fargo’s duties as trustee, including providing certain notifications to certificate holders, for 271 RMBS trusts created between 2004 and 2008. Wells was to administer the trusts, and it had no role in the origination or servicing of the mortgages at issue, according to the bank. The agreement resolves a significant portion of the claims asserted against the company in connection with its role as trustee for RMBS trusts. Separate lawsuits filed by certain other institutional investors concerning 58 trusts are not covered by the agreement.
“Consistent with our sound business practices, we believe that we appropriately fulfilled our duties as trustee by performing the responsibilities prescribed in the relevant contracts for these decade-old trusts,” said Troy Kilpatrick, head of corporate trust services at Wells. “While we disagree with the allegations, it is in the best interest of all parties to put this protracted litigation behind us and we are satisfied with this settlement.”
Wells Fargo had disclosed the RMBS Trustee litigation in its public filings, including in its most recent Quarterly Report on Form 10-Q. The settlement amount was fully accrued on June 30.
