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FHFA, Credit Suisse Reach $885M Agreement

The Federal Housing Finance Agency (FHFA) and Credit Suisse announced a nearly $900 million settlement to resolve alleged violations of securities laws in connection with private-label mortgage-backed securities (MBS) purchased by the GSEs during 2005-2007.

According to separate releases from both FHFA and Credit Suisse, the bank will pay approximately $234 million to Fannie Mae and approximately $651 to Freddie Mac—$885 total.

The settlement—the ninth out of 18 suits filed against banks by the FHFA in 2011—closes all claims against Credit Suisse in two lawsuits: FHFA v. Credit Suisse, et al. and FHFA v. Ally Financial Inc., et al.

The cases revolved around a total $16.6 billion of residential MBS for which FHFA alleged Credit Suisse failed to conduct “adequate and reasonable due diligence.”

“During the time period in which the Certificates were issued—approximately 2005 through 2007—Credit Suisse’s involvement in the mortgage-backed securitization market was rapidly expanding,” the agency said in its 2011 complaint. “The push to securitize large volumes of mortgage loans contributed to the absence of controls needed to prevent the inclusion of untrue statements of material facts and omissions of material facts.”

Though Credit Suisse has agreed to pay to resolve what it calls its “largest mortgage-related investor litigation,” the settlement includes no admission of liability or any wrongdoing on the part of the bank: “To the contrary, the Credit Suisse Defendants vigorously deny the allegations in the Credit Suisse and Ally Actions.”

Credit Suisse also announced its 2013 Annual Report will now include a charge of $275 million Swiss Francs (CHF)—about $311.6 million U.S. dollars—after tax. Adjusting its preliminary financial results, the bank’s reported fourth-quarter net loss comes to $8 million CHF.

The latest settlement serves as another feather in the cap of FHFA, which has acted as Fannie and Fannie’s conservator since 2008. In 2013 alone, the agency pulled in nearly $8 billion through settlements with JPMorgan Chase, UBS Americas, and others.


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