) fell nearly 1% following the announcement of a mortgage
settlement deal with the Federal Housing Finance Agency (FHFA),
the conservator of
). The British banking multinational will pay $280 million to
compensate for its faulty mortgage activities during the
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Of the total settlement amount, Barclays will shell out $227 to
Freddie Mac and $53 million to Fannie Mae. The deal resolves
claims in two lawsuits pertaining to the same issue filed by the
FHFA in the U.S. District Court for the Southern District of New
York. Notably, the company assured that this would not affect its
Barclays had allegedly sold risky loans worth $4.9 billion to
Freddie Mac and Fannie Mae during 2005-07, thereby resulting in
huge losses for investors. However, with the tightening of
regulations in 2011, Barclays was one of the 18 institutions sued
by the FHFA for selling faulty mortgage-backed securities to
Freddie Mac and Fannie Mae.
The FHFA continues with its endeavors to protect investors'
interest and provide a secured investment environment for them.
Since 2011, the agency has reached settlements with 13 financial
organizations (including Barclays) and received nearly $16.0
billion as compensation. Additionally, in Nov 2013,
Wells Fargo & Company
), which was not part of the above-mentioned litigation, agreed
to pay $335.2 million to resolve similar charges.
Further, though the latest settlement removes a major legal
headwind for Barclays, the company is still facing probes and
investigations. This might lead to an increase in legal expenses,
thereby weighing on the company's profitability in the quarters
Currently, Barclays carries a Zacks Rank #5 (Strong Sell).