Flagstar Bancorp in Troy, Mich., has resolved a longstanding issue with the Justice Department.
The $31 billion-asset company disclosed in a regulatory filing Tuesday that it agreed to pay $70 million in cash to fully address a settlement it reached with the government in 2012. It will record a $35 million charge in the first quarter to account for the payment.
The settlement concerned Flagstar’s underwriting practices tied to loans insured by the federal Department of Housing and Urban Development. In 2012 the company reached a deal with the Justice Department to make an initial $15 million payment and to make future payments totaling $118 million. The timing of the payments was dependent on Flagstar’s financial performance and other conditions.
Flagstar did not specify how much of the $118 million it eventually paid, though it said in the filing that its current strength positioned it to resolve the matter.
Flagstar “is benefiting significantly from a robust mortgage market,” Tuesday’s filing said. “In light of the long-standing relationship and ongoing business activities with HUD, the company decided to settle this legacy liability.”
Piper Sandler analyst Scott Siefers noted that the liability was inherited from a prior management team.
The charge “seems reasonable … given that we expect [Flagstar] to generate over $200 million in mortgage” revenue in the first quarter, Siefers wrote in a client note. “We like that it resolves a complex issue.”
