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U.K. Lender May Have To Pay More Than Expected to Settle FHFA Suit

Royal Bank of Scotland Settlement FHFARoyal Bank of Scotland (RBS) may have to pay additional penalties to settle claims that it sold faulty U.S. mortgage-backed securities in the years leading up to the housing market crash, according to a report from Reuters.

RBS had already set aside the equivalent of about $3 billion in U.S. dollars to cover settlement costs relating to the sale of $32 billion worth of faulty mortgage-backed securities to Fannie Mae and Freddie Mac in a case being handled by the U.S. District Court in Connecticut. However, the conservator of the two GSEs, the Federal Housing Finance Agency (FHFA), might ask the bank to pay up to the equivalent of $7.7 billion in U.S. money to settle the claims, according to the report.

A spokesperson from the FHFA declined to comment on the RBS situation.

In June, RBS agreed to pay $99.5 million to settle a separate FHFA suit claiming that the bank sold more than $2 billion worth of faulty mortgage-backed securities to Fannie Mae and Freddie Mac between 2005 and 2007, the years of the "housing bubble" in the U.S.

RBS and Nomura Holdings are the last two out of the 18 lenders to settle with the FHFA after the Agency sued the lenders in 2011 to recoup U.S. taxpayer costs following the government's $188 billion bailout of Fannie Mae and Freddie Mac in 2008. The other 16 lenders have paid about $24 billion to settle claims, including $9.3 billion paid by Bank of America in March 2014.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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