Fannie Mae reached a $170 million lawsuit settlement Friday to resolve allegations that it defrauded shareholders and inflated its stock by issuing false and misleading statements about its risk management, mortgage exposure and overall finances before it was taken over by the federal government six years ago.

The settlement sets aside $123.8 million for common stockholders and $46.2 million for preferred stockholders between Nov. 8, 2006 and Sept. 5, 2008. Fannie Mae's market value peaked during that period at more than $60 billion. It is now an estimated $2.71 billion.

The settlement, which requires court approval, was disclosed in a Friday filing with the U.S. District Court in Manhattan.

"We are pleased to put this matter behind us," Joseph Grassi, Fannie Mae's interim general counsel, said in a statement. "This is another sign of progress as Fannie Mae continues our focus on serving the market and helping lenders make mortgage credit available to qualified borrowers."

A separate lawsuit over Fannie Mae's disclosures was brought in 2011 by the Securities and Exchange Commission against former CEO Daniel Mudd and former Chief Risk Officer Enrico Dallavecchia. The case is pending. The SEC filed a similar lawsuit against former Freddie Mac officials, including onetime CEO Richard Syron.

Fannie Mae and Freddie Mac together drew approximately $187.5 billion of bailout funds, but have since returned an estimated $218.7 billion to taxpayers in the form of dividends.

The government seized Fannie Mae and the smaller Freddie Mac on Sept. 7, 2008 and put them into a conservatorship under the Federal Housing Finance Agency, where they remain.

The law firms Labaton Sucharow and Berman DeValerio, which represented common stockholders, and Kaplan Fox & Kilsheimer, which represented preferred stockholders, plan to seek fees of as much as 20% of the settlement fund.




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