April 29, 2014 / 10:00 PM / in 4 years

UPDATE 1-First Horizon to pay $110 mln to settle U.S. agency's mortgage claims

(Adds further details on settlement, background on litigation)

By Nate Raymond

NEW YORK, April 29 (Reuters) - First Horizon National Corp will pay $110 million to resolve claims it misled Fannie Mae and Freddie Mac into buying mortgage-backed securities that later went sour, a U.S. regulator said on Tuesday.

The settlement resolves a lawsuit filed in New York federal court by the Federal Housing Finance Agency, the conservator since 2008 for the government-controlled mortgage companies.

The deal marked the 12th settlement the FHFA has reached in litigation the agency began in 2011 in a number of lawsuits over about $200 billion in mortgage-backed securities, an investment product at the center of the 2008 financial crisis.

As part of the deal, First Horizon will pay $61.6 million to Fannie Mae and $48.4 million to Freddie Mac, the FHFA said.

First Horizon Chief Executive Bryan Jordan said in a statement that the settlement was “another big step forward” in the Memphis, Tennessee-based bank’s efforts to unwind from its former mortgage businesses.

First Horizon said it does not expect the accord to materially impact earnings for the second quarter of 2014. The bank said it had already established a reserve for the case and had insurance available to cover part of the deal.

The FHFA’s lawsuit accused First Horizon of misleading Fannie Mae and Freddie Mac into buying $883 million in faulty mortgage-backed securities from September 2005 to April 2007.

To date, the FHFA has recovered more than $16 billion in direct connection with the lawsuits over similar securities, according to the agency.

The deal with First Horizon followed a similar $280 million settlement between the FHFA and Barclays Plc announced on Thursday.

Other banks to reach settlements include Bank of America Corp, JPMorgan Chase & Co, Deutsche Bank AG and Morgan Stanley.

Only four defendants remain, including Goldman Sachs Group Inc, Nomura Holdings Inc, Royal Bank of Scotland Group, and HSBC Holdings Plc.

The case is Federal Housing Finance Agency v. First Horizon National Corporation, U.S. District Court, Southern District of New York, No. 11-06193. (Reporting by Nate Raymond; Editing by Grant McCool and Ken Wills)

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