Thursday August 5, 2021

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HSBC Pays $550M to Clear Name Over U.S. Mortgage Bond Dispute

Sep 13, 2014 02:44 AM EDT | By Eunice Tagalog
HSBC, Freddie Mac, Fannie Mae, Federal Housing Finance Agency, Mortgage

HSBC Holdings Plc (HSBC) settles worth $550 million over claims of false representations in selling mortgage bonds to U.S. government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac before the financial meltdown.

Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) were created by the Congress to make mortgages available to more people with low to moderate incomes.

The British bank was in discussions between HSBC-U.S. and Federal Housing Finance Agency (FHFA), the organization appointed to handle the financial affairs of Fannie Mae and Freddie Mac on Sept. 12.

The settlement came even before another Sept. 29 trial in New York, where the bank was reportedly facing up to $1.6 billion in damages.

Eighteen lawsuits have been filed to the FHFA back in 2011 regarding losses on $200 billion in mortgages sold to Fannie Mae and Freddie Mac.

The current lawsuit claimed that HSBC falsely represented to the two GSEs the loans worth $6.2 billion of mortgage-backed securities sold from 2005 to 2007.

HSBC kept mum on the accusations, and did not curb to the offense filed against the company.

Under the agreement, HSBC will shoulder $374 million worth of damages from Freddie Mac and $176 million to Fannie Mae, according to FHFA.

Aside from HSBC, lawsuits were filed against other banks including Bank of America Corp., Deutsche Bank AG and Morgan Stanley and Goldman Sachs Group.

The Goldman Sachs Group Inc. reportedly shelled out a settlement valued at $ 1.2 billion.

Many of the banks cases were overseen by U.S. District Judge Denise Cote, who issued several rulings to make it harder to defend the case.

The banks, instead agreed to a settlement because of the tough rulings.

The case is Federal Housing Finance Agency v. HSBC North America Holdings INc., U.S. District Court, Southern District of New York, No. 11-06189

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