M&T Bank said it's in discussions with U.S. officials to settle an investigation into the lender's origination and sale of federally insured home loans.

The probe involves mortgages insured by the Federal Housing Administration that M&T sold to Freddie Mac and Fannie Mae, the Buffalo, New York-based bank said Wednesday in a regulatory filing.

The Department of Justice and the Department of Housing and Urban Development are investigating whether the firm complied with underwriting guidelines, M&T said. The bank said it's cooperating and has begun settlement discussions.

Based on its own review of the loans, M&T said it disagrees with the government's methodology and analysis. Remedies could include penalties, restitution or fines, the bank said.

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