US banking giant Citigroup Wednesday announced an agreement to pay Freddie Mac $395 million to settle claims of potential flaws in millions of mortgages it sold Freddie.
Wednesday’s settlement covers potential future claims on 3.7 million loans sold to the quasi-public Freddie between 2000 and 2012, a period that includes the housing boom. Freddie has contended that Citi and other banks sold it loans that did not meet key standards.
Citi said it would finance the payment with its existing mortgage repurchase reserves.
Banks must make representations to Freddie about the loans before they are sold. If the claims are faulty, the bank can be forced to repurchase the loans.
Wednesday’s settlement ends the back-and-forth between Freddie and Citi on the loans at issue.