NEW YORK — (Mealey’s) Barclays Bank PLC and certain of its affiliates will pay $280 million to settle claims with the Federal Housing Finance Agency (FHFA) in two related lawsuits alleging that Barclays and its affiliates misrepresented the investment quality of certain residential mortgage-backed securities they sold to Fannie Mae and Freddie Mac in violation of state and federal securities laws, according to court documents released on April 24 (Federal Housing Finance Agency v. Barclays Bank PLC, et al., No. 11-6190, S.D. N.Y.; See November 2012, Page 38; and Federal Housing Finance Agency v. Ally Financial Inc., No. 11-7010, S.D. N.Y.; See December 2011, Page 46).
Under the terms of the settlement, which are subject to court approval, Barclays will pay $227 million to Freddie Mac and $53 million to Fannie Mae to settle claims that Barclays Bank, subsidiaries Barclays Capital Inc. and Securitized Asset Backed Receivables LLC (SABR), SABR CEO Michael Wade, Chief Financial Officer John Carroll and Chief Accounting Officer Paul Menefree (collectively, the Barclays defendants) issued a series of false and misleading statements regarding the investment quality and underwriting guidelines and standards compliance of the underlying mortgage loans and properties that made up more than $4.9 billion in residential mortgage-backed securities Barclays sold to Fannie Mae and Freddie Mac in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, Sections 13.1-522(A)(ii) and 13.1-522(c) of the Virginia Securities Act and Sections 31-5606.05(a)(1)(B) and 31-5606.05(c) of the District of Columbia Code.
The settlement also pertains to a related lawsuit the FHFA filed against Ally Financial Inc. and covers all claims alleged therein.
Thursday’s settlements mark 13 settlements the FHFA has made with financial institutions over their sale of mortgage-backed securities to Fannie Mae and Freddie Mac. The FHFA originally filed 18 separate but related lawsuits against numerous financial institutions, alleging the same claims.
The FHFA is represented by Marc E. Kasowitz of Kasowitz, Benson, Torres & Friedman in New York.
Ally Financial is represented by Richard A. Spehr, Michael Orth Ware and S. Christopher Provenzano of Mayer Brown; Alan C. Turner and Thomas C. Rice of Simpson Thacher & Bartlett; Brad S. Karp and Susanna M. Buergel of Paul, Weiss, Rifkind, Wharton & Garrison; Shane, Nelles, Brian T. Frawley, David H. Braff, Jordan Toumey Razza, Joseph E. Neuhaus, Michael T. Tomaino Jr. and Theodore Edelman of Sullivan & Cromwell; Jay B. Kasner and Scott D. Musoff of Skadden, Arps, Slate, Meagher & Flom; and Michael T. Reynolds and Richard W. Clary of Cravath, Swaine & Moore, all in New York.
The Barclays defendants are represented by David H. Braff, Brian T. Frawley, Jeffrey T. Scott and Joshua Fritsch of Sullivan & Cromwell in New York.
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