By Peter Schroeder - 07/20/11 07:18 PM EDT
The Federal Reserve has fined Wells Fargo $85 million for steering potential homeowners to costlier subprime mortgages.
The banking regulator announced Wednesday that employees with Wells Fargo Financial — a former non-bank subsidiary of Wells Fargo — pushed borrowers that would qualify for traditional, prime mortgages into riskier, more expensive subprime loans, and also falsified income information on mortgage applications.
In its statement, the Fed said the way Wells Fargo Financial paid its employees and set sales quotas, coupled with lax oversight, encouraged employees to push pricier subprime mortgages on borrowers.
Wells Fargo agreed to the Fed's action, but did not admit to any wrongdoing. However, it agreed to beef up its anti-fraud and compliance programs, as well as to improve oversight of its compensation and performance management programs for employees that sell mortgages. Sixteen former Wells Fargo Financial employees have been barred from working in the banking industry again.