Matthew Goldstein

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California Threatens to Pull Wells Fargo's Mortgage License

Matthew Goldstein

Talk about not getting any home state advantage.

California officials on Wednesday set wheels in motion on a process that could result in San Francisco-based Wells Fargo(WFC) being stripped of its license to write mortgages in the Golden State.

But such a ruling is a long way off, and it looks like California and the nation's fourth-largest bank may be headed to a long legal battle.

The California Department of Corporations, in seeking the administrative hearing, claims that Wells Fargo has failed to reimburse mortgage holders for improper fees and interest charges. The state agency took the action after a series of regulatory reviews that began two years ago.

Wells Fargo, one of the nation's biggest mortgage issuers, tried to head off the state action by suing the agency in federal court last week. That suit seeks a court injunction preventing the state agency from carrying through on its threat.

A Wells Fargo spokeswoman said the bank disputes the agency's characterization of the fees as "overcharges." She said it's "business as usual" until the court rules on the lawsuit.

A spokesman for the state agency could not be reached for comment. But a state attorney said no hearing before an administrative law judge on the license revocation issue has been set.

The bank's shares dropped $1.41, or 3%, to $45.32 in Wednesday trading.

Wells Fargo last year was one of the better performing bank stocks. Strong revenue numbers from it home mortgage division helped fuel profit growth at Wells Fargo.