Freddie Mac has entered into a $1.3bn settlement with three major lenders.
The first, with Wells Fargo, will see the nation’s biggest mortgage lender pay $869 million to settle claims that it sold shoddy mortgages to Freddie Mac.
The settlement involved mortgages Wells Fargo sold to Freddie prior to January of 2009. Freddie and Fannie Mae had demanded that big banks such as Wells Fargo buy back bad mortgages that failed during the housing meltdown, the AP reported. Banks can be forced to buy back bad mortgages if it can be proven that misrepresentations were made about how well the loans were underwritten or borrowers’ ability to repay them.
Freddie Mac said that Friday’s settlement was adjusted for $89 million of claims payments made to Freddie previously, meaning the finance company would receive a cash payment of about $780 million.
Citigroup settled similar claims with Freddie last week, agreeing to pay about $395 million. Freddie Mac said it had also entered into an agreement with SunTrust, under which the lender will pay the mortgage giant a total of $65 million, less $25 million it has already paid out.
"With these settlements, Freddie Mac is recouping funds effectively due to the nation's taxpayers," Freddie Mac CEO Donald H. Layton said. "We believe these settlements are equitable, and we are pleased to have resolved legacy repurchase issues with three of our valued customers."