By Bob Garfield—Politico | September 16, 2019| 5:19pmWashington—Cabot Holdings Corp. will pay $2.4 billion to settle charges it misled investors and the U.S. government about the risks posed by the mortgage-backed securities it sold to Fannie Mae and Freddie Mac.
The settlement with U.K. and European regulators will be the largest federal government settlement with a mortgage-lending company.
The deal also requires Cabot to make some financial changes to its loan origination processes.
Cabott, which is based in Dallas, had a net loss of $1.4 trillion in the first three months of 2019, and the company has faced legal challenges in the past over the quality of its loans.
It had already paid $500 million to settle claims it sold subprime mortgages at inflated rates and inflated the risk they posed to investors.
The settlement with regulators will also require Cabot, which has more than 2,200 employees in the U., to provide investors with a financial statement.CABOT said it will not pay for the settlement or any new litigation to date.
The company said in a statement that the settlement “will provide investors in the securities class action the assurance that the securities are safe, sound, and meet all regulatory requirements and are not at risk of loss.”
Cabots board, led by CEO John Bogle, will also be made whole.
In January, the company paid $4.3 billion to resolve a class-action lawsuit alleging that it deceived investors about the risk of mortgage-based securities, which it marketed to borrowers.
Cabbot’s shares fell more than 9% on news of the settlement, which will not impact the company’s share price, and are now down about 17% from the $36 price the company posted in mid-September.
The deal was announced in the same statement by Cabot Chairman and CEO John A. “Jack” Cabot Jr. and Chief Financial Officer Tom Haines, who have served in the role since January.
Haines and Cabot have worked together for nearly four decades.
In his capacity as CFO, Hain, Cabot and Hain’s father, John B. Cabot Sr., are expected to have a hand in the company moving forward.