American International Group Inc. said it has agreed to reserve $178 million, part of which will pay broker and lender fees, in a settlement of its alleged mishandling of subprime homeowner loans that a federal regulator said were not properly managed.
New York-based insurer AIG said on Friday that an agreement was reached with the Office of Thrift Supervision (OTS), a regulatory banking arm of the Treasury Department, over practices of the company's three lending subsidiaries in managing subprime borrowers.
AIG has reserved $178 million to cover the cost of providing affordable loans to borrowers whose creditworthiness was questionable at the time of the original loans and to reimburse borrowers who paid large broker or lender fees when the loans originated. The company will also pay an additional $15 million for financial literacy programs and credit counseling.
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