Flagstar Bancorp (FBC) in Troy, Mich., will pay $110 million to settle allegations that it misrepresented the quality of more than $1 billion of private label mortgage-backed securities it sold to investors.

The settlement ends a suit that MBIA Insurance Corporation brought in January, alleging that Flagstar lied about the quality of loans backing $1.1 billion of securities that MBIA insured in 2006 and 2007. MBIA said that it had to pay $165 million to cover losses the two securities trusts suffered.

Flagstar said Thursday that the settlement will have no significant financial impact due to its high litigation reserves. In February, Flagstar said it would set aside $161 million to cover potential losses in the MBIA case and other lawsuits over its mortgage-underwriting practices. The announcement came shortly after a federal judge ordered it to pay $90 million to bond insurer Assured Guaranty Municipal Corp over allegations it misled the insurer over the quality of loans backing $1 billion of securities. Flagstar said it disagrees with the ruling and intends to appeal.

The $13.1 billion-asset company said Thursday's settlement would help it move past its troubles related to the housing crisis. It has been selling loans outside of its home state as Chief Executive Michael Tierney tries to reinvent the company as a "super community" Michigan bank with a national mortgage business.

"Today's announcement represents another major milestone in putting legacy challenges behind us," Tierney said in Thursday's news release. "We can now focus more time and attention on our national mortgage business and our community banking operations in Michigan."

Flagstar's stock was up nearly 5% in trading Friday morning, to $13.25, following the settlement announcement.

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