The Federal Housing Finance Agency (FHFA) announced on Wednesday a multibillion settlement with the Royal Bank of Scotland Group over the sale of shoddy mortgages ahead of the 2008 financial crisis.
The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, said the Royal Bank of Scotland would pay a $5.5 billion fine over its subprime mortgage lending practices between 2005 and 2007.
“Today’s announcement is an important step forward in resolving one of the most significant legacy matters facing RBS,” said Ross McEwan, the bank’s chief executive.
{mosads}”This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions,” McEwan said in a statement.
The British government took over Royal Bank of Scotland after the financial crisis that rocked the globe, and taxpayers still own 72 percent of the Edinburgh-based institution.
Under the terms of the agreement, Royal Bank of Scotland will pay approximately $4.525 billion to Freddie Mac and approximately $975 million to Fannie Mae and certain claims against the bank related to the securities involved will be released, the FHFA said.
FHFA’s case against the bank alleges violations of federal and state securities laws in connection with private-label residential mortgage-backed securities trusts purchased by Fannie and Freddie between 2005 and 2007.
In 2011, FHFA filed 18 lawsuits alleging violations within the mortgage finance sector. The Royal Bank of Scotland settlement is the 17th case to be decided.
A separate settlement from the Justice Department is expected later this year that could exceed the FHFA’s penalty.