In 2011, FHFA filed a case against Citi and 16 of its competitors, accusing them for mis-selling mortgage-backed securities to the government-sponsored mortgage firms.
Without specifying the amount and terms of the settlement, lawyers of both the parties in a filing in US District Court in Manhattan, said that they have settled the case.
In the lawsuit, the housing regulator claimed that Fannie and Freddie purchased $3.5bn of MBS from Citi during 2005 to 2007.
In this process, "significant percentages of the underlying mortgage loans were not originated in accordance with the stated underwriting standards and origination practices and had materially poorer credit quality than what was represented in the registration statements."
FHFA filed a total of 18 lawsuits against financial organizations involving claim of $200bn of mortgage-backed securities sold to Fannie and Freddie by giving materially false statements about the quality of mortgages.
It has already settled the case with General Electric and the pact with Citi will further pave ways for faster negotiations with other organizations.
Cases were also filed against Goldman Sachs, Morgan Stanley, JPMorgan Chase, Nomura, Credit Suisse and Royal Bank of Scotland, among others.
