WASHINGTON (MNI) – The following is an announcement by the Federal
Reserve Wednesday regarding a civil penalty against Wells Fargo:

The Federal Reserve Board on Wednesday issued a consent cease and
desist order and assessed an $85 million civil money penalty against
Wells Fargo & Company of San Francisco, a registered bank holding
company, and Wells Fargo Financial, Inc., of Des Moines. The order
addresses allegations that Wells Fargo Financial employees steered
potential prime borrowers into more costly subprime loans and separately
falsified income information in mortgage applications. In addition to
the civil money penalty, the order requires that Wells Fargo compensate
affected borrowers.

The $85 million civil money penalty is the largest the Board has
assessed in a consumer-protection enforcement action and is the first
formal enforcement action taken by a federal bank regulatory agency to
address alleged steering of borrowers into high-cost, subprime loans.

Wells Fargo Financial–a once-active, non-bank subsidiary of Wells
Fargo–made subprime loans that primarily refinanced existing home
mortgages in which borrowers received additional money from the loan
proceeds in so-called cash-out refinancing loans. The order addresses
allegations that Wells Fargo Financial sales personnel steered borrowers
who were potentially eligible for prime interest rate loans into loans
at higher, subprime interest rates, resulting in greater costs to
borrowers. The order also addresses separate allegations that Wells
Fargo Financial sales personnel falsified information about borrowers
incomes to make it appear that the borrowers qualified for loans when
they would not have qualified based on their actual incomes.

These practices were allegedly fostered by Wells Fargo Financials
incentive compensation and sales quota programs and the lack of adequate
controls to manage the risks resulting from these programs. These
deficiencies allegedly constitute unsafe and unsound banking practices
and unfair or deceptive acts or practices that are prohibited by the
Federal Trade Commission Act and similar state laws. In agreeing to the
order, Wells Fargo did not admit any wrongdoing. The order requires
Wells Fargo to compensate borrowers affected by these practices. To
identify prime-eligible borrowers with cash-out refinancing loans who
were subject to improper steering, Wells Fargo is required to reevaluate
the qualifications of all borrowers who took out a subprime, cash-out
refinancing loan between January 2006 and June 2008 to account for
certain specific steering techniques. To identify Wells Fargo Financial
borrowers whose income information was falsified without their
knowledge, Wells Fargo is required to set up a procedure for potentially
affected borrowers to show that their actual income at the time did not
qualify them for the loans they were granted. Wells Fargo is required to
provide notice of this procedure to all borrowers who obtained cash-out
refinancing loans between January 2004 and June 2008 at a Wells Fargo
Financial office where there is evidence that sales personnel at that
office altered or falsified borrowers income information.

These compensation plans must be approved by the Federal Reserve.
An independent, third-party administrator will review determinations
about the eligibility of individual borrowers for compensation and the
amounts of compensation provided. The Federal Reserve will also monitor
compliance with the approved plans. Failure to comply with the plans
will constitute a breach of the cease and desist order.

The amount of compensation provided to individual borrowers will
depend on a number of factors, including differences between what
borrowers paid and what they should have paid in terms of origination
points, interest payments, fees, and penalties. Until specific
determinations of harm to individual borrowers are made, it is difficult
to determine the total amount of compensation provided to borrowers.
Based on preliminary estimates, the amount of compensation that each
eligible borrower will receive ranges between $1,000 and $20,000, but
some eligible borrowers may receive less than $1,000 and others may
receive more than $20,000. The number of borrowers who may receive
compensation under both plans is estimated to be between 3,700 and
possibly more than 10,000.

Further information for borrowers may be found at
www.wellsfargo.com/mortgage.

In addition to the monetary components of the settlement, Wells
Fargo is required to improve oversight of its anti-fraud and compliance
programs and incentive compensation and performance management policies
for personnel who sell and underwrite home mortgage loans. The Board
also has issued consent orders against 16 former Wells Fargo Financial
sales personnel prohibiting them from becoming employed in the banking
industry. The Board has also issued a consent cease and desist order
against another former Wells Fargo Financial sales person prohibiting
future improper conduct.

** Market News International Washington Bureau: 202-371-2121 **

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