The PNC Financial Services Group, Inc. (PNC - Free Report) reached a settlement with Freddie Mac related to faulty mortgages sold before the financial crisis. The Pennsylvania-based bank will pay a sum of $89 million, excluding credits of $8 million. The amount will be paid from PNC Financial’s existing reserves.
The settlement will compensate for past losses as well as possible losses in the future related to almost 900,000 loans sold to Freddie Mac from 2000 to 2008. The problem loans covered under the settlement mostly stem from National City. PNC Financial had acquired National City in 2008.
PNC Financial’s latest move follows its settlement with Freddie Mac's counterpart, Fannie Mae in November. Both the settlements are subject to approval from the Federal Housing Finance Agency – the regulator of Freddie Mac and Fannie Mae.
The aforementioned deal is expected to put an end to PNC Financial’s representations and warranties claims related to the loans sold to Freddie Mac and Fannie Mae before the financial crisis. Moreover, it will likely reduce the bank’s litigation costs in the coming quarters.
Since 2009, Freddie Mac and Fannie Mae have compelled several lenders to repurchase bad loans worth billions of dollars. In the past few months, Freddie Mac reached settlements with Wells Fargo & Company, Citigroup Inc., JPMorgan Chase & Co. and SunTrust Banks, Inc. regarding similar mortgage-related issues.
Last week, Bank of America Corporation (BAC - Free Report) announced a settlement deal under which it will pay $391 million (with $13 million adjustment for repurchases already made) to Freddie Mac to resolve similar charges.
PNC Financial currently carries a Zacks Rank #3 (Hold).