Citigroup, one of the third largest US banks, said the settlement resolves claims for breaches of representations and warranties on 3.7 million loans, and it also covers potential future claims arising from the loans purchased by Freddie Mac.
Commenting on the issue, CitiMortgage CEO Jane Fraser said, "Today’s agreement with Freddie Mac marks another important milestone in successfully resolving Citi’s remaining legacy mortgage issues.
"Looking forward, Citi remains focused on continuing to provide high quality mortgage products and service to our customers."
With the current settlement, Citi is not free from liability with respect to its servicing or other ongoing contractual obligations on the included loans.
The bank said that it has and will continue to co-operate with Freddie Mac on the timely repurchase of any mortgage loans sold to Freddie Mac that do not meet Freddie Mac’s requirements.
In July this year, Citi agreed to reimburse a penalty of $968m to settle the similar claims by Fannie Mae.
The US Federal Housing Finance Agency (FHFA) accused the bank of selling the subprime loans packaged into securities to Fannie Mae (FNMA) and Freddie Mac (FMCC), inspite of being aware that the assets were toxic in nature.
In 2011, FHFA filed a total of 18 lawsuits against financial organizations involving $200bn claim of residential mortgage backed securities (RMBS) sold between 2005 and 2007 to Fannie and Freddie by giving materially false statements about the quality of mortgages.
Fannie Mae and Freddie Mac, which are being managed by the FHFA, collapsed during the financial crisis of 2008, and were subsequently injected with nearly $187.5bn by the US government to keep them running.
In similar case, the housing regulator reportedly demanded JP Morgan Chase & Co to pay $6bn to settle cases over sale of bad mortgage bonds to government-backed finance companies.
Bank of America (BofA) reached an $11.6bn settlement with Fannie in January and a similar $1.3bn settlement with Freddie during 2011.
