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Wells Fargo & Co. agreed to pay $2.09 billion to settle with the Justice Department over the sale of toxic mortgage-backed securities during the financial crisis, the Wall Street Journal reported. The Justice Department said yesterday that it reached a civil settlement with Wells Fargo to end the long-running probe into the matter. Wells Fargo had already set aside funds to cover the settlement. The bank and the Justice Department had negotiated for several months over the amount, which at one point ranged between $2.5 billion and $3 billion. The Justice Department said in a release that the settlement “holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”

A federal appeals court in Texas has ruled that the single-director structure of the Federal Housing Finance Agency is unconstitutional but validated a dividend agreement requiring the government-sponsored enterprises to deliver nearly all of their profit to the Treasury Department, National Mortgage News reported. The U.S. Court of Appeals for the Fifth Circuit in Texas reversed the previous court’s decision and agreed with the shareholders that the FHFA was “unconstitutionally insulated from executive control” since its single director — as opposed to a board or commission — cannot be fired by a sitting president without cause. If upheld, the decision could render the agency’s actions void. The court panel consisted of Chief Judge Carl Stewart and Judges Catharina Haynes and Don Willett. Haynes agreed with the court’s decision, while Stewart dissented on the constitutionality issue. Willett also dissented on the profit sweep issue.

The foreclosure machine that ground to a halt in Puerto Rico after the devastation caused by Hurricane Maria in September is slowly cranking up again, the New York Times reported. Island residents who fell behind on their payments are facing creditors ranging from Wall Street to the federal government. Over the last four months, nearly 300 new foreclosure actions were filed in federal court in San Juan and in local courts across the island. Among the firms filing cases are an investment firm controlled by Credit Suisse, one in which the private equity firm TPG Capital is an investor and banks like Citigroup and Santander. Even the United States Department of Agriculture, which has underwritten more than 3,000 mortgages in mainly rural areas of Puerto Rico, has begun to foreclose on delinquent borrowers. The filings are some of the first in Puerto Rico since several federal agencies — including the U.S.D.A. — imposed moratoriums on new foreclosures and legal actions in existing cases after the hurricane devastated the island’s electrical grid. But the moratoriums have begun to expire, setting the stage for what housing advocates have feared could be a wave of home foreclosures in the United States territory of 3.4 million people.

Treasury Secretary Steven Mnuchin told Congress yesterday that he now aims to reform the bailed-out government-sponsored enterprises next Congress, and delivered a message to the companies’ government caretaker to stop allowing them to expand their missions, the Washington Examiner reported. “We need GSE reform,” Mnuchin said yesterday during testimony before the House Financial Services Committee. “This is something that I am determined, in the next Congress, should be a major focus of ours — hopefully on a bipartisan basis. But we can’t just leave these things sitting the way they are as they have been.” Mnuchin, a former banker involved in housing finance, came into office pledging to end the government’s conservatorship of Fannie and Freddie, ongoing since the financial crisis in 2008. But Congress barely got going on reform. Mnuchin said yesterday that he would consider administrative options if Congress does not act next session.

A decade on big U.S. banks are still running down and selling off crisis-era mortgages, a process executives point to as weighing on loan growth, Reuters reported. Eager to see a turning point in loan books, analysts count these portfolios as one factor, along with home equity loan runoff and new mortgage demand, to watch for when deciphering the true loan growth picture as U.S. second-quarter bank earnings start today. Wells Fargo & Co and Bank of America Corp executives have flagged portfolios from prior to the 2008-09 crisis era where banks are no longer originating similar new products when they are asked to predict a turning point in consumer loans. “These are portfolios of a bygone era that were very, very painful for the banks,” said Gerard Cassidy, bank analyst with RBC Capital Markets. “They are not plain vanilla portfolios, which means they are more costly to manage. It may just not be worth the headache.” Analysts have said higher loan growth is critical to driving bank’s stock prices, but they anticipate only a modest acceleration year over year, driven primarily by commercial and industrial loans, not residential. Bank of America at the end of 2017 had nearly $11 billion in credit-impaired mortgages left from buying Countrywide Financial, less than one-third of what it held at the end of 2009. JPMorgan Chase & Co still owns roughly $30.5 billion-worth of the $89 billion in bad loans took on from Washington Mutual in 2008.