Revealed: More Settlements for Bad Mortgages, this Time from GE and Citigroup

Back to the bad mortgages on Thursday:  The Federal Housing Finance Administration in Washington, D.C., announced several big settlements for damages suffered by government-affiliated companies because of questionable lending practices.

The biggest payment comes from Citigroup, which paid $250 million.

The FHFA regulates Fannie Mae and Freddie Mac, which are independent companies that buy mortgage-backed securities from the nation's bank and mortgage issuers.  The FHFA was appointed to act as conservator for the organizations, which were endangered when many mortgages underlying the securities went into default as the economy turned down in 2008.

The FHFA filed suit against 18 institutions in 2011.  On Thursday, it provided for the first time a list of eight companies had settled federal suits filed against them by the FHFA, and the amounts:

  • 1. General Electric Co.--$6.25 million
  • 2. Citigroup Inc.--$250 million
  • 3. UBS Americas Inc.--$885 million
  • 4. JP Morgan Chase & Co.--$4 billion
  • 5. Deutsche Bank AG--$1.925 billion
  • 6. Ally Financial Inc.--$475 million

The UBS, JP Morgan Chase and Deutsche Bank settlements were previously announced.  But while GE, Citigroup, and Ally Financial settled last year, the terms were released for the first time Thursday. (Ally is the former GMAC Inc.; its wholly-owned Residential Capital LLC subsidiary was placed into bankruptcy by the parent last year, and focused on sub-prime mortgages. The parent was bailed out by the federal government in 2008-2009, and is still majority-owned by the government.)

The FHFA alleged in its 2011 suits securities laws violations and fraud against the lenders in their actions in procuring the mortgages and then in the sale to Fannie Mae and Freddie Mac. The agency didn't specify which of the lenders it accused of fraudulent practices.

In its press release, which can be found HERE, the agency noted that "[s]ettlement amounts result from calculating various factors, including statutory calculations, number of securities, unique circumstances of each matter and litigation risks."

There are 13 actions or defendants remaining to be settled, and they include more marquee names, including Bank of America and Goldman Sachs. The remaining open matters are listed on the press release.

The release included one nonlitigation settlement, too:  Wells Fargo & Co. settled nonlitigation claims against by the FHFA for $335.23 million back in November.  You can read about more Wells Fargo-Fannie Mae settling on QuidnuncRE from earlier this week, HERE, for $591 million, covering a different time period.

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