HSBC Agrees to Pay $550M to Resolve U.S. Mortgage Claims

Mortgage & Real Estate









HSBC Holdings Plc will pay $550 million to resolve accusations of misconduct in its handling of mortgage securities that saddled taxpayers with losses after the financial crisis.

The U.S. unit of the London-based lender reached the deal to end Federal Housing Finance Agency claims that the firm sold faulty mortgage bonds to Fannie Mae and Freddie Mac, the bank said today in a statement.

The FHFA sued 18 banks in 2011 to recoup taxpayer costs after the U.S. seized control of the failing mortgage-finance companies in 2008. Seven firms, including JPMorgan Chase Co. and Deutsche Bank AG, agreed to pay a total of almost $8 billion last year to settle claims they made misrepresentations about mortgages underlying securities bought by Fannie Mae and Freddie Mac in the run-up to the crisis.

Last month, Goldman Sachs Group Inc. agreed to pay $3.15 billion, representing a premium of about $1.2 billion, to repurchase residential mortgage-backed securities. Morgan Stanley agreed in February to pay $1.25 billion as part of a settlement over $10.6 billion in securities.

Bank of America Corp. announced a $9.5 billion accord in March, including paying $6.3 billion in cash to Fannie Mae and Freddie Mac and buying back $3.2 billion of mortgage bonds from them. The housing-finance companies bought about $57 billion of bonds from Bank of America and its predecessor firms.

U.S. District Judge Denise Cote said in a July ruling that all except four of the FHFA cases had been settled. The remaining cases involved Goldman Sachs, HSBC, Nomura Holding America Inc. and RBS Securities Inc., she said.

Fannie Mae and Freddie Mac received $187.5 billion in U.S. aid and have returned more than $200 billion under terms of their federal conservatorship.

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