Citi settles lawsuit by FHFA over $3.5 bln in mortgage securities

* Federal Housing Finance Agency agrees to dismiss lawsuit

* Agency will not say how much Citi will pay

* Agency still in talks with other banks -spokeswoman

NEW YORK, May 28 (Reuters) – Citigroup Inc has reached a settlement with a federal agency that had accused the bank of misleading Fannie Mae and Freddie Mac into buying $3.5 billion of mortgage-backed securities.

The settlement with the Federal Housing Finance Agency was disclosed in a filing on Tuesday in U.S. District Court in Manhattan, where a series of related cases by the agency against Wall Street banks are pending.

The filing did not disclose the terms of the deal. FHFA spokeswoman Stefanie Johnson said the settlement was “satisfactory” but declined to say how much Citi would pay.

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