Flagstar To Pay $8.9 Million To Freddie Mac

Posted by Patrick Barnard on December 30, 2013 No Comments
Categories : Required Reading

Flagstar Bancorp Inc., the holding company for Flagstar Bank, will pay government-sponsored enterprise (GSE) Freddie Mac $8.9 million to settle claims that it sold faulty mortgage loans to the GSE between Jan. 1, 2000, and Dec. 31, 2008.

The total resolution amount is $10.8 million, less credits Flagstar has received for previous repurchase agreements. Flagstar reports that it has enough in its reserves to cover the full settlement amount.

‘This agreement is another positive step for Flagstar in further reducing the company's risk profile while supporting improved performance,’ says Alessandro (Sandro) DiNello, president and CEO for Flagstar, in a release. ‘We believe that our accomplishments in 2013 have positioned Flagstar for sustainable long-term growth in 2014 and beyond.’Â Â

In November, Flagstar paid $93.5 million to settle similar claims made by Fannie Mae, sister GSE to Freddie Mac. The total amount of that settlement was $121.5 million.

Earlier this year, Flagstar settled a similar suit with MBIA Insurance Corp., in which Flagstar paid $110 million.

Multiple similar settlements have been reached during the past two years, as mortgage servicers and lenders work to resolve disputes stemming from the sale of faulty mortgages and mortgage-backed securities in the aftermath of the 2008 financial crisis.

Earlier this month, mortgage servicer Ocwen Financial Corp. and its subsidiary, Ocwen Loan Servicing, were ordered by state and federal regulators to provide $2 billion in principal reduction to underwater borrowers for the company's alleged ‘systemic misconduct at every stage of the mortgage servicing process.’

In addition, the company – the largest non-bank mortgage servicer and the fourth-largest servicer in the U.S. – has been ordered to refund $125 million to nearly 185,000 borrowers who have already been foreclosed upon and must adhere to significant new homeowner protections.

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