Well Fargo (WFC) Fraud Charges Have Roots in Diminished FHA Balance Sheet
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Rating Summary:
28 Buy, 20 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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In light of news yesterday that the Justice Department filed suit against Wells Fargo (NYSE: WFC) related to deficiencies in underwriting FHA certified mortgages, analysts expect ongoing efforts to recoup damages that may target other banks.
Interestingly, the report by Compass Point noted that the FHA insurance fund is at risk of depleting its remaining reserves, which were at paltry 0.24 percent in 2011, far below its mandated 2 percent requirement.
"We believe the FHA will continue pressing forward with efforts such as these legal actions, as well as other loss mitigation efforts such as delinquent loan sales, in an attempt to fortify their troubled balance sheet," said Compass Point analyst Kevin Barker.
Barker also said he doesn't expect the case to result in a major change for Wells Fargo.
"If Wells were to settle these charges for $190 million, it would only result in $0.02/share in lost earnings," he said.
Compass Point has a Buy on Wells Fargo (NYSE: WFC) and a price target of $41.00.
For an analyst ratings summary and ratings history on Wells Fargo click here. For more ratings news on Wells Fargo click here.
Shares of Wells Fargo closed at $35.10 yesterday.
Interestingly, the report by Compass Point noted that the FHA insurance fund is at risk of depleting its remaining reserves, which were at paltry 0.24 percent in 2011, far below its mandated 2 percent requirement.
"We believe the FHA will continue pressing forward with efforts such as these legal actions, as well as other loss mitigation efforts such as delinquent loan sales, in an attempt to fortify their troubled balance sheet," said Compass Point analyst Kevin Barker.
Barker also said he doesn't expect the case to result in a major change for Wells Fargo.
"If Wells were to settle these charges for $190 million, it would only result in $0.02/share in lost earnings," he said.
Compass Point has a Buy on Wells Fargo (NYSE: WFC) and a price target of $41.00.
For an analyst ratings summary and ratings history on Wells Fargo click here. For more ratings news on Wells Fargo click here.
Shares of Wells Fargo closed at $35.10 yesterday.
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