First Tennessee Bank, the regional bank for First Horizon National Corp., said it has reached an agreement with the U.S. Department of Housing and Urban Development (HUD) and the United States Department of Justice (DOJ) to settle claims of mortgage lending violations related to the business it sold in 2008.
Under the agreement, First Tennessee will make a cash payment of $212.5 million. First Horizon previously reserved $50 million for the settlement and said it expects to report a pre-tax expense of $162.5 million related to the agreement in its first quarter financial results. First Horizon is set to announce financial results for the first quarter on April 17.
This is another major legal resolution as First Tennessee unwinds from the mortgage business the company sold in 2008. In the past several years, First Tennessee has resolved a number of other legal matters related to its former mortgage business and has sold substantial amounts of nonstrategic mortgage loans and mortgage servicing.
The recent claims from HUD are related to First Tennessee's underwriting and origination of FHA-insured mortgage loans from Jan. 1, 2006, through Dec. 31, 2008. Final legal resolution remains subject to negotiation and execution of a formal written settlement agreement satisfactory to all parties.