UPDATE 1-Societe Generale to pay $122 mln to resolve U.S. mortgage lawsuit

Thu Feb 27, 2014 3:35pm EST

By Nate Raymond and Jonathan Stempel

NEW YORK Feb 27 (Reuters) - Societe Generale has agreed to pay $122 million to settle a lawsuit by a U.S. regulator accusing the bank of misleading Fannie Mae and Freddie Mac in the purchase of mortgage-backed securities.

The settlement, announced by the Federal Housing Finance Agency (FHFA) on Thursday, marked the eighth to date by the FHFA, which in 2011 filed 18 lawsuits over some $200 billion in mortgage-backed securities that were at the heart of the 2008 financial crisis.

The deal, which resolves a case over $1.3 billion in securities, was the latest reminder of the continuing mortgage liabilities facing banks.

Some the largest headaches have been the cases by the FHFA, which has acted as conservator for Fannie and Freddie since their government takeover in 2008.

The deal with Paris-based Societe Generale follows Morgan Stanley's agreement earlier this month to pay $1.25 billion to resolve a similar case by the FHFA.

The agency has overall has recovered $8.91 billion in settlements in the litigation with deals being cut with banks including JPMorgan Chase & Co, Deutsche Bank AG and Citigroup Inc, among others.

The FHFA reached a separate $335.2 million settlement with Wells Fargo & Co over mortgage securities without filing a lawsuit.

The settlement is "already substantially reflected in an existing specific reserve for this matter," Societe Generale said in a statement. The bank on Feb. 12 said it had set aside about 700 million euros (US$960 million) at year-end for litigation.

"The settlement will have no material impact on the group's earnings," Societe Generale said Thursday.

Litigation remains pending against several other banks, including Bank of America Corp, Credit Suisse Group AG and Royal Bank of Scotland Group Plc. Bank of America's Merrill Lynch is scheduled to go to trial first on June 2.

The case is Federal Housing Finance Agency v. SG Americas, Inc. et al, U.S. District Court, Southern District of New York, No. 11-06203.