Fitch: First Horizon Freddie Settlement Positive Step; Credit Neutral

Mon Mar 3, 2014 11:54am EST

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(The following statement was released by the rating agency) CHICAGO, March 03 (Fitch) First Horizon National Corporation's (FHN) recently announced agreement with Freddie Mac (FHLMC) relating to loans sold to the GSE between 2000 - 2008 is credit neutral to the company's 'BBB-' ratings, according to Fitch Ratings. The agreement with FHLMC follows the company's 4Q'13 settlement with Fannie Mae (FNMA) pertaining to loans sold during a similar time period. That announcement resulted in a $200 million provision to FHN's mortgage repurchase reserve to account for the FNMA settlement as well as estimation for the FHLMC settlement. While credit neutral overall, Fitch generally views the settlements as positive steps forward for FHN in getting out from under various legal overhangs that resulted from past national mortgage lending strategies. Fitch expected that the FHLMC settlement would occur in close proximity to the FNMA agreement. Furthermore, Fitch's current rating and outlook for FHN incorporated the view that the $200 million provision made in 3Q'13 would be sufficient to cover both GSE-related settlements and other idiosyncratic costs relating to legacy strategies. With the FHLMC settlement, the company released $30 million of its mortgage repurchase reserve likely due to a more favorable outcome than initially projected. Fitch expects FHN to continue to resolve outstanding legal contingencies over the near-to-mid-term. Separate from the FHLMC settlement, the company added $27 million to its litigation reserve which now has approximately $60 million set aside to likely cover potential payouts relating to the origination and sale of $27 billion of private-label securitizations between 2005 and 2008. FHN is currently subject to five securitization-related lawsuits and three indemnification claims. Fitch notes FHN is also being investigated by the U.S. Department of Justice (DOJ) (on behalf of the Housing and Urban Development ) relating to the underwriting of FHA loans which could result in further settlement payouts. The outcome and timing of these lawsuits, as well as any lawsuits FHN could be named apart of in the future, is presently unclear and thus not explicitly incorporated in FHN's current ratings. However, Fitch's expectation that FHN will maintain reasonable capital levels relative to its overall risk profile is incorporated in the company's current ratings and Outlook. Contact: Primary Analyst Bain K. Rumohr, CFA Director +1-312-368-3153 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Julie Solar Senior Director +1-312-368-5472 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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