Pomerantz files a class action lawsuit against Wells Fargo

Pomerantz LLP has filed a class action lawsuit against Wells Fargo & Company and certain of its current and former senior executives, on behalf of investors. The complaint alleges defendants made “materially false and misleading statements regarding the company’s business, operational and compliance policies.” 

Filed in United States District Court for the Northern District of California (20-cv-07997), the law firm said in a statement, the class action includes “a class consisting of all persons other than defendants who purchased or otherwise acquired Wells Fargo securities between October 13, 2017 and October 13, 2020.”

Plaintiff “seeks to pursue remedies” against Wells Fargo and certain of the company’s officers under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and its Rule 10b-5, according to the statement. 

Pumerantz also announced shareholders who purchased Wells Fargo securities during the class action period mentioned above have until December 29, 2020, “to ask the Court to appoint you as Lead Plaintiff for the class.”

Specifically, Wells Fargo allegedly failed investors by making false or misleading statements and/or failed to disclose that: 

  • Wells Fargo systematically failed to follow appropriate underwriting standards and due diligence guidelines in issuing billions of dollars’ worth of commercial loans, including by inflating the net income and future expected cash flows
  • A higher proportion of Wells Fargo’s commercial loan customers were of poor credit quality, hence a substantially higher risk of default than disclosed to investors
  • Wells Fargo failed to timely write down commercial loans, collateralized loan obligations (CLOs) and commercial mortgage backed securities (CMBS) that had suffered impairments
  • Materially understated the reserves needed for expected credit losses in its commercial portfolios
  • Systematically misrepresented the credit quality and likelihood of default of the loans it packaged and securitized into CLOs and CMBS, including by artificially inflating the net income and expected cash flows of its commercial clients in loan and securitization documentation
  • The CLO and CMBS-related loans issued and investment securities held by Wells Fargo were of lower credit quality and worth far less than represented to investors. 

As a result, Wells Fargo, one of the largest banks in the world by market capitalization and total assets, “was exposed to severe undisclosed risks of financial, reputational and legal harm, in particular in the event of significant and sustained stress in the commercial credit markets,” Pomerantz noted.

Examples include shareholder losses on several occasions in 2020: 

On October 14, 2020 – the megabank released its third quarter of 2020 press release, which stated that Wells Fargo’s non-accrual loans had increased $2.5 billion, or 45%, to $8 billion during the quarter, and recognized a provision expense of $769 million. 

On this news, that day Wells Fargo’s stock price fell another 6% to close at $23.25 per share.

The third quarter news followed prior quarterly events. Wells Fargo’s Q1 2020 results showed deterioration in the credit portfolio, particularly in the commercial loans portfolio. 

On April 14, 2020 – two days later, Wells Fargo’s stock price fell 14%, closing at $26.89 per share.

Similarly, the Q2 2020 release showed Wells Fargo suffered a $2.4 billion loss, or ($0.66) per share, “largely as a result of deterioration in its commercial credit portfolio.”  

On this news, the stock price fell another 5% to close at $24.25 per share on July 14, 2020. 

Fannie prices $783M multifamily bond

Fannie Mae priced a $783 million Multifamily DUS REMIC under its Fannie Mae Guaranteed Multifamily Structures (Fannie Mae GeM) securitization program on November 10, 2020. FNA 2020-M52 marks the tenth Fannie Mae GeMS issuance of 2020.

“In a week marked by market uncertainty, rate volatility, and climbing COVID-19 numbers, we were pleased with the execution of the M52,” said Dan Dresser, senior vice president, multifamily capital markets & pricing. “This deal brought our total GeMS issuance for 2020 to $8.5 billion, which represents only a fraction of the entire FNA market this year as ACES issuance hit record levels.”

With one more month of issuance to go, he explained, the combined GeMS and Automated Client Eligibility System (ACES) volumes have reached $26.3 billion over 50 deals, allowing investors and broker dealers to structure REMICs with their own DUS collateral.

Such flexibility has been particularly helpful to liquidity given the year’s rate environment, he added. “As we head into December and prepare to close the books on 2020, we would like to express our appreciation for the support of our GeMS investor community and the broker dealer network.”

Following are the structure details for the multi-tranche FNA 2020-M52 offering.

Additional information is available here.  

Arbor: Migration fuels SFR demand in Q3 

The single-family rental (SFR) sector is having a moment, according to Arbor’s third quarter analysis, as estimates show the market reached its highest reading since 1994. From 2007 lows, occupancy rates for all SFR properties are up by 5.6%.

As measured by the Census Bureau, occupancy rates across all SFR properties averaged 95.3% in Q3 2020, and have held steady from Q2 2020 after a 100 bps spike from Q1 2020. Data reflect a combination of “rising user demand and landlords’ prioritizing tenant retention,” analysts wrote. 

By comparison, owner-occupied single-family housing units’ occupancy rates reached 99.1% in Q3 2020, the second-highest reading on record, topped only by the 99.2% rate measured in Q2 2020.

The new data support anecdotal reports of single-family housing demand far outstripping available supply. The imbalance ultimately will motivate “would-be owners unable to find affordable entry-level housing” to transition into SFRs.

According to DBRS Morningstar, from June to July, SFR annual rent growth on lease renewals increased by 90 bps to 2.3%. For properties that have transitioned from vacant-to-occupied (V2O), yearly rent growth ticked up by 30 bps, at a 6.5% rate.

The spread between rent growth on renewals and V2O units rose to 4.2% in the same month, just behind its June peak of 4.8%. Comparatively, the report found, before April 2020, the spread between V2O and renewals had routinely tracked in negative territory and had never topped 2.2%.  

The rate of newly signed SFR leases and rent growth usually rises through the spring and peaks in the early summer months before falling and re-starting the cycle. 

The report found growing evidence that “the pandemic did not impede the typical V2O rent growth pattern” it just created a delay. Rent growth in V2Os charted a 6.5% year-over-year increase in July, the highest growth rate in more than four years, “once restrictions started to ease.”

Year-over-year rent growth in lease renewals, which tends to see far less seasonal variability than newly signed SFR leases, fell dramatically between April and June to 1.4% – the lowest annual rent growth on record. It compares to an average of 4.5% annual rent growth on renewals between the start of 2019 and March 2020. 

A 92 bps rent growth improvement in July however, indicates recovery may already be underway. According to RealPage, many apartment owners stopped planned rent increases and more frequently used concessions to entice renters to renew. 

When COVID-19 hit in March, was not clear how an urban exodus would change SFR demand. Rent collections are reportedly holding in line with 2019 levels, occupancy rates have reached generational highs, and rent growth pressures for V2O units have firmed.

Going forward, the SFR sector “may be the best positioned residential asset class to see continued growth through the end of the pandemic,” according to the report. “SFR’s favorable countercyclical profile has combined with a confluence of demographic and migration factors, boosting tenant demand and retention.”

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