Citi settles $3.5bn mortgage suit Citigroup settled a $3.5bn lawsuit with the US housing regulator, breaking with other banks who have held out against a deal in one of the last big post-crisis lawsuits related to mortgage wrongdoing. The Federal Housing Finance Agency sued Citi and 16 of its rivals in 2011, arguing that the banks had mis-sold mortgage-backed securities to Fannie Mae and Freddie Mac, the government-sponsored mortgage companies which were bailed out in 2008. On Tuesday, in a filing to a New York court, lawyers for Citi and the FHFA said they had settled the case. They did not specify the size of the settlement. However, similar cases have settled for cents on each dollar of principal balance outstanding, which amounted to $3.5bn in the case against Citi. Citi had previously joined other banks including Bank of America and Barclays in fighting the FHFA's case. In an earlier motion to dismiss the lawsuit, it argued that the complaint was late, that Freddie and Fannie should have understood the risks in the securities they were buying and accused the regulator of "a hodgepodge" of "generalised and irrelevant allegations." Citi and a lawyer for the FHFA declined to comment. An FHFA spokesman could not be reached for comment. In its complaint, the FHFA said Fannie and Freddie bought $3.5bn of MBS from Citi between 2005 and 2007 and "significant percentages of the underlying mortgage loans were not originated in accordance with the stated underwriting standards and origination practices and had materially poorer credit quality than what was represented in the registration statements." The FHFA has previously settled one of the 17 cases, with General Electric, but the Citi deal is the first of the larger banks to settle, the most significant breakthrough in more than a year of negotiations. In total the FHFA alleged the banks mis-sold almost $200bn of mortgage-backed securities, by making "materially false" statements about the quality of mortgages that were bundled into securities and sold, and demanded compensation for billions of dollars of losses. Bank stocks fell sharply when the suits were announced but have performed well in the past 12 months, partly because institutions - most prominently BofA - which have been dogged by a broad range of mortgage-related lawsuits have settled a large proportion of them, reducing uncertainty over their exposure. US banks such as Goldman Sachs, Morgan Stanley, JPMorgan Chase and Citi as well as overseas institutions such as Nomura, Credit Suisse and Royal Bank of Scotland were all targeted by the FHFA along with individual employees who were accused of signing documents that the FHFA said were false.