M&T Bank is in talks with the federal government to resolve an investigation of a pre-crisis sale of FHA-insured and conforming mortgages to Fannie Mae and Freddie Mac that resulted in losses for the government-sponsored enterprises. The New York-based bank disclosed the settlement discussion in a second-quarter filing with the Securities and Exchange Commission and is cooperating with the investigation. The Department of Justice and the Department of Housing and Urban Development’s Inspector General are investigating whether M&T Bank complied with FHA’s underwriting guidelines as well as with guidelines for selling loans to Fannie and Freddie. It is unclear how much the FHA paid out in loss claims in this case but investigators said that, based upon their review of a sample of FHA loans for which a claim was paid, “some of the loans do not meet underwriting guidelines.” M&T Bank could be ...