Moody’s Corp. agreed to pay nearly $864 million to settle claims for its role providing credit ratings for Residential Mortgage-Backed Securities and Collateralized Debt Obligations that contributed to the financial crisis.
On Friday, the Department of Justice, 21 states, and the District of Columbia announced the settlement agreement with Moody’s Investors Service Inc.,Moody’s Analytics Inc., and their parent, Moody’s Corporation, resolving pending state court lawsuits in Connecticut, Mississippi, and South Carolina, as well as potential claims by the Justice Department, 18 states and the District of Columbia.
In a release of the earnings call transcript, provided by Seeking Alpha, the Chief Financial Officer of Wells Fargo, Tim Sloan, reports that very same scandal is dragging down its mortgage referral business.
“Our existing customers have continued to use their accounts and we’ve seen higher deposit and credit card balances and increased credit and debit card transaction volume which drives near-term revenue,” Sloan said.
Sloan said the impact is still being felt and that the decline in the rate of new account openings may impact the pace of future revenue growth.
“In addition, we’re also tracking the impact to our other businesses, while businesses that are not reliant on retail banker referrals have not been significantly impacted, lower banker referrals continue to affect businesses such as mortgage,” he added.
Referrals accounted for approximately 9% of mortgage originations in 2016, Sloan said. He added that the bank expects lower referrals in the fourth quarter will reduce funding volumes in the first quarter by approximately 2.5%.
Overall, mortgage banking results decreased $250 million from third quarter and included a $163 million decline in mortgage servicing income primarily due to higher unreimbursed servicing costs.