The Federal Housing Finance Agency (FHFA) announced on Wednesday that it had reached a multibillion dollar settlement with the Royal Bank of Scotland (RBS) over its subprime mortgage lending practices leading up to the 2008 financial crisis. In 2011, the FHFA sued eighteen different financial institutions, including RBS, for misrepresenting the quality of mortgage-backed securities sold to Fannie Mae and Freddie Mac. This is the 17th settlement to date.
Under the settlement agreement, RBS will pay approximately $4.525 billion to Freddie Mac and approximately $975 million to Fannie Mae. In exchange, the FHFA agreed to release certain securities-related claims against the bank. The settlement does not include any admission of wrongdoing by RBS.
At the peak if the financial crisis in 2008, the British government took over RBS as part of a bank rescue package totaling more than $850 billion. British taxpayers still own 72% of the company. In a statement, RBS CEO Ross McEwan called the settlement “a stark reminder of what happened to this bank before the financial crisis,” and acknowledged that British taxpayers “have paid a high price” for the bank’s “poor decisions.”
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