Wells Fargo will pay more than $2 billion for allegedly lying about the quality of subprime and Alt-A mortgages that backed residential mortgage-backed securities in the run-up to the housing crisis, the Department of Justice announced Wednesday.

According to the DOJ, Wells Fargo allegedly knew that loans that went into the mortgage bonds in question were based on misstated income information and allowed the loans to be securitized and sold nonetheless.

“Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities containing loans originated by Wells Fargo,” the DOJ said in a statement.

According to the DOJ, beginning in 2005, Wells Fargo launched an initiative to double its originations in subprime and Alt-A loans. As part of that push, Wells Fargo allegedly “loosened its requirements” surrounding stated income loans, which are loans where a borrower declares their income without providing documentation to prove it.

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Courtesy of HousingWire