Fannie, Freddie Regulator Extracts $8 Billion From Banks in 2013

NEW YORK (TheStreet) --The Federal Housing Finance Agency disclosed Thursday that it had recovered nearly $8 billion for taxpayers in 2013 through settlements with seven financial institutions that sold private-label securities to Fannie Mae (FNMA) and Freddie Mac (FMCC) in the run-up to the financial crisis.

The regulator of the bailed-out housing giants had sued 17 banks in 2011 alleging violations of securities laws and in some cases, fraud, in the sale of $200 billion worth of residential mortgage-backed securities. It also separately sued swiss bank UBS (UBS) on similar grounds. The suits didn't specify damages.

In 2013, the FHFA entered into settlements with six banks originally named in the lawsuit: Citigroup (C), JPMorgan Chase (JPM), UBS, General Electric  (GE), Deutsche Bank (DB) and Ally Financial. It also entered into a separate, $335 million settlement with Wells Fargo (WFC), which was not part of the original lawsuit.

While the settlements had been previously announced, the regulator hadn't  disclosed the settlement amounts for some of the defendants. On Thursday, the FHFA disclosed that it had received $250 million from Citigroup, $6.25 million from General Electric and $475 million from Ally Financial.

The biggest chunk of the settlement came from JPMorgan, which forked out $4 billion, as previously disclosed. Deutsche Bank paid $1.925 billion to settle charges.

The FHFA still has cases pending against the other 12 banks named in the lawsuit, notably Bank of America (BAC), Goldman Sachs (GS) and Morgan Stanley (MS).

But the sizes of the settlement are likely to vary widely with the quality of loans sold by each bank. For instance, while JPMorgan paid a fine about 12% of the $33 billion it sold to the agencies, Citi's tab, as evident from the latest disclosure, was relatively lighter at about 7% of the $3.5 billion in securities it sold.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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