The bank made the admission as it reported its weakest quarterly profits in more than six years.
For the three months to the end of September, its net profit rose just 4% to $2.28bn, compared with $2.19bn for the same third-quarter period in 2006.
Wells Fargo is just the latest bank to reveal its exposure to the downturn in the US sub-prime mortgage sector.
'Tough environment'
The bank's quarterly revenues rose 10% from a year earlier to $9.9bn, although this was helped by a $160m one-off gain from the sale of certain low-yielding mortgage securities.
"It was a tough environment," said Wells Fargo's chief financial officer, Howard Atkins.
"Credit markets seized up and the housing market took another downturn."
The results were slightly ahead of market expectations.
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