In conducting an investigation of possible fraud in relation to Wells Fargo & Co.'s sale of almost $60 billion in residential mortgage-backed securities, the U.S. Securities and Exchange Commission on Friday requested that a federal court order the country's largest mortgage lender to comply with its subpoenas.
The SEC filed its application for the order requiring compliance with its subpoenas in the U.S. District Court for the Northern District of California (San Francisco).
Importantly, the SEC said, "The commission notes that it is continuing to conduct a fact-finding inquiry and has not concluded that anyone has broken the law."
"The commission's action [on Friday] relates to its investigation into whether Wells Fargo made material misrepresentations or omitted material facts in a series of offerings between September 2006 and early 2008," according to the SEC.
"The commission's application explains that, in connection with the securitization of the loans, a due-diligence review of a sample of the loans in each offering was performed," the SEC noted. "Certain loans within that sample would be dropped from the offering for failure to comply with Wells Fargo's loan underwriting standards."
However, the SEC said: "[I]t does not appear that Wells Fargo took any steps to address similar deficiencies in the remainder of the loans in the pool, which were securitized and sold to investors. The commission is investigating, among other things, whether Wells Fargo misrepresented to investors that the loans being securitized complied with the bank's loan underwriting standards."
In conducting its probe, the SEC has issued a number of subpoenas to Wells Fargo since last September seeking materials related to the bank's due diligence and its underwriting guidelines, among other things.
"Wells Fargo agreed to produce the documents, and set forth a timetable for doing so, yet has failed to produce many of the materials," according to the SEC.
If the SEC request is granted, then the San Francisco-based Wells Fargo would have 14 days to hand over 1,365 emails and other documents under subpoena, according to Bloomberg News.
A Wells Fargo representative said in an emailed statement that this enforcement action is unwarranted and that it will defend itself in court, Bloomberg reported.
The company also said the SEC inaccurately described its conduct involving residential mortgage-backed securities, according to the Associated Press.
Securities and Exchange Commission v. Wells Fargo & Co., Civil Action No. CV-1280087, U.S. District Court, Northern District of California (San Francisco).