HSBC pays US$550m to settle US claims over mortgage-backed securities
Pay-out resolves claims bank misled America's Fannie Mae, Freddie Mac on mortgage securities
HSBC has agreed to pay US$550 million to resolve claims the bank misled US government housing corporations Fannie Mae and Freddie Mac about risky mortgage securities it sold them before the US housing market collapsed in 2007.
HSBC sold the securities to the two mortgage companies - the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation - between 2005 and 2007. Under the settlement, HSBC is paying US$176 million to Fannie and US$374 million to Freddie.
"We are pleased to have resolved this matter," said Stuart Alderoty, HSBC North America's senior executive vice-president and general counsel.
The settlement is the latest US federal government agreement over actions related to the financial crisis that struck in 2008. The meltdown, triggered by vast sales of high-risk mortgage-backed securities, plunged the US economy into the deepest recession since the Great Depression. The securities soured after the housing bubble burst in 2007, losing billions of US dollars in value.
The US government rescued Fannie and Freddie at the height of the financial crisis in September 2008 when they were on the verge of collapse. The companies received taxpayer aid totalling US$187 billion. They have since become profitable and repaid the bailouts in full.
The FHFA sued 18 financial institutions in 2011 over their sales of mortgage securities to Fannie and Freddie.
The total price for the securities sold was US$196 billion. The agency said on Friday that it had now reached settlements with all but two of the banks.
A number of big banks, including Goldman Sachs, JPMorgan, Bank of America and Citigroup, have previously been accused of abuses in sales of securities linked to mortgages in the years leading up to the crisis.
Together, they have paid hundreds of millions of dollars in penalties to settle civil charges brought by the US Securities and Exchange Commission, which accused them of deceiving investors about the quality of the bonds they sold.
Goldman agreed in 2010 to pay US$550 million to settle the SEC's charges, the largest penalty against a Wall Street firm in the agency's history.
In recent months, the US Justice Department and state regulators have reached multibillion-dollar agreements over mortgage securities with JPMorgan, Citigroup and Bank of America.
