Investors Seek Investigation Into $19 Billion Wells Fargo Mortgage Bonds

Gibbs & Bruns LLP--the law firm that helped secure a proposed $8.5 billion mortgage settlement with Bank of America Corp. (BAC)--Thursday said its investor clients seek an investigation into more than $19 billion of mortgage securities issued by Wells Fargo & Co. (WFC).

Wells Fargo, the nation's largest mortgage lender, is the second bank after the proposed Bank of America settlement that Gibbs & Bruns is targeting. Last month, the firm said it is seeking an investigation into $95 billion worth of mortgages securitized by J.P. Morgan Chase & Co. (JPM).

"Today's action is another step toward achieving that goal" of forcing banks to find a solution for mortgages the investors and the law firm allege were ineligible for the securitization trusts, said Kathy D. Patrick, Gibbs & Bruns' lead counsel for the holders of the trust's securities.

A spokesman for Wells Fargo declined to discuss the matter.

Gibbs & Bruns said it represents clients holding more than 25% of the voting rights in 48 trusts underwritten by Wells Fargo. That threshold is critical to force U.S. Bancorp (USB) and HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK), as the trustees of the securitization trusts, to investigate the matter.

Bank of America and investors led by money manager BlackRock Inc. (BLK), investment-fund giant Pacific Investment Management Co. and the New York Federal Reserve Bank reached their settlement in June.

The Bank of America investors first said there were problems in $47 billion of mortgage securities--but the amount eventually morphed to include $424 billion of original mortgage principal.

The $8.5 billion settlement, however, has since faced a rash of intervention and criticism from two state attorneys general and other investors in mortgage bonds.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

--David Benoit contributed to this article.

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