The bank will pay $374m to Freddie Mac and $176m to Fannie Mae.
The FHFA charged HSBC of falsely representing that loans underlying $6.2bn of mortgage-backed securities met underwriting guidelines and standards. This cost Fannie Mae and Freddie Mac more than $30bn.
FHFA has filed lawsuits against 18 banks in 2011 to recoup losses worth $200bn in mortgage-backed securities sold to Fannie Mae and Freddie Mac.
Several banks including JPMorgan Chase, Deutsche Bank, Goldman Sachs Group, Morgan Stanley, Bank of America and others have agreed to pay the fines, with Royal Bank of Scotland and Nomura yet to settle their cases.
Meanwhile, HSBC denied committing any wrong doing, and said it stopped selling residential mortgage-backed securities in 2007.
HSBC North America senior executive vice-president and general counsel Stuart Alderoty said: "We are pleased to have resolved this matter."
