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HSBC Agrees to Pay $550M in RMBS Settlement

gavelHSBC Holdings [1] is the latest institution to make good with the Federal Housing Finance Agency [2] (FHFA) after the firm's North American arm agreed Friday to pay hundreds of millions to settle claims revolving around faulty mortgage-backed securities (MBS) sold to Fannie Mae and Freddie Mac in the years before the crash.

In a settlement announced Friday [3], HSBC agreed to pay $550 million to FHFA to resolve allegations it violated state and federal securities laws in its selling of private-label securities to the GSEs between 2005 and 2007. HSBC stopped issuing and distributing MBS in 2007.

The settlement did not include an admission of wrongdoing on HSBC's part.

"We are pleased to have resolved this matter," said Stuart Alderoty, senior EVP and general counsel for HSBC North America.

Under the terms of the agreement, $374 million will go to Freddie Mac, with the remaining $176 million going to Fannie Mae.

To date, all principal and interest payments have been made on the securities related to the settlement, HSBC said in a statement.

FHFA first brought claims against HSBC and more than a dozen other banks in 2011, seeking repayment for losses the GSEs took during and after the financial meltdown as defaults skyrocketed. Aided by funds recovered from the settlements and a pickup in the housing market in the last few years, profits at both companies have recovered, and both have paid back the entirety of the bailout money they took from the government.

With the HSBC settlement, only two of the 18 lawsuits FHFA filed in 2011 have not been resolved. In a statement [4], the agency said it will continue "to pursue a satisfactory resolution of these actions."