UBS AG, Switzerland’s largest bank, agreed to pay $885 million to Fannie Mae and Freddie Mac to settle claims that it improperly sold them mortgage-backed securities during the housing bubble, a U.S. regulator said.

The Federal Housing Finance Agency claimed Zurich-based UBS misrepresented the quality of loans underlying billions of dollars in residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac. The firms have operated under U.S. conservatorship since 2008, when they were seized amid subprime mortgage losses that pushed them toward insolvency.

UBS disclosed earlier this week that it had reached an agreement in principle to settle the suit.

“The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” Acting Director Edward J. DeMarco said in an e-mailed statement.

FHFA sued UBS and 17 other banks in 2011, seeking to recover losses on a total of $200 billion in mortgage-backed securities sold to the two government-sponsored enterprises.

UBS is the third bank to reach an agreement with FHFA. Citigroup Inc. and General Electric Co. have both paid undisclosed amounts to settle the regulator’s claims.

“UBS was fully provisioned for this settlement, which was in the best interests of our clients and shareholders,” said Karina Byrne, a spokesman for UBS Americas. Byrne said the settlement gives UBS full release from other potential claims in connection with residential mortgage-backed securities.

In November, U.S. District Judge Denise Cote, who is overseeing the UBS suit and most of the other FHFA suits, denied a request by Citigroup, Bank of America Corp. and two other banks to dismiss them.

The case is Federal Housing Finance Agency v. UBS Americas Inc., U.S. District Court, Southern District of New York (Manhattan).