HSBC, the famous British banking giant, announced Friday that it has settled a faulty mortgage lawsuit with the U.S. Federal Housing Finance Agency (FHFA) for $550 million after it was found guilty of selling shoddy home loans to Fannie Mae and Freddie Mac.
The FHFA, which regulates lending giants Fannie Mae and Freddie Mac, sued the North American arm of HSBC and 17 other institutes for selling faulty mortgages that bogged down the two firms into deep debts eventually leading to the housing market crash in 2007-08.
According to the terms of the settlement, HSBC will pay $176 million to Fannie Mae and $374 million to Freddie Mac. Initially, HSBC resisted to the lawsuit denying claims of selling bad mortgages to the two lending firms. However, the bank lost a bid to dismiss the lawsuit last month.
The FHFA also threatened to sue by Sept. 29, if the company failed to reach a consensus by then, reports Reuters.
"We are pleased to have resolved this matter," Stuart Alderoty, general counsel for HSBC North America, said in a statement.
HSBC is the latest institution to settle with the FHFA on the mortgage lawsuits. Last month, Goldman Sachs agreed to shell out $1.2 billion in penalties to settle the issue. Several other firms like Barclays PLC, Citigroup and J.P Morgan Chase have already resolved lawsuits with the agency, the largest being Bank of America's $9.5 billion penalty.
"Only two of the 18 lawsuits FHFA filed in 2011 have not been resolved. FHFA continues to pursue a satisfactory resolution of these actions," the agency said in a statement.
Fannie Mae and Freddie Mac were bailed out by the government when the housing market crashed in 2007. The companies received an aid of around $170 billion.
Due to the housing recovery, Fannie Mae and Freddie Mac have become profitable now. As of May 2014, Freddie Mac has already paid $86.3 billion, while Fannie returned $126.8 billion.
Plans to wind down the two lending bigwigs are still under government scrutiny. The much-anticipated senate vote on the bill to eliminate Fannie Mae and Freddie Mae was delayed in April despite gaining enough support.
