By Saabira Chaudhuri
Fifth Third Bancorp (FITB) agreed to pay $25 million to Freddie
Mac (FMCC) as part of a settlement over defective mortgages sold to
the government-controlled home-loan financier.
Freddie Mac and its larger sibling, Fannie Mae (FNMA), can force
banks to buy back mortgages that don't conform to agreed-upon
guidelines, and both companies have demanded that lenders
repurchase billions in soured loans over the past four years.
Monday's deal with Freddie involves mortgage loans originated
and sold to Freddie Mac prior to Jan. 1, 2009, regardless of
whether the agency has made any repurchase demands.
Fifth Third noted that as of the end of the third quarter, it
was fully reserved to cover the payment amount.
The lender's agreement comes after SunTrust Banks Inc. (STI)
last month agreed to pay more than $200 million to resolve claims
with Freddie Mac and sister firm Fannie Mae.
Meanwhile, in September, Citigroup Inc. (C) agreed to pay $395
million to Freddie Mac to settle claims of defective mortgages sold
to the home-loan financier.
The federal regulator for Fannie and Freddie has directed the
firms to reduce repurchase demands outstanding by year-end.
Shares of Fifth Third closed Friday at $20.58 and were inactive
premarket. The stock has risen 35% so far this year.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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