ZURICH—Credit Suisse Group AG has become the latest bank to settle with the Federal Housing Finance Agency over allegations it misrepresented mortgage-backed securities sold before the financial crisis, paying $885 million and removing some of the legal cloud that hangs over the Swiss lender in the U.S.

Zurich-based Credit Suisse said in a statement Friday that the settlement covers claims in two lawsuits filed by the FHFA alleging that it misled Fannie Mae and Freddie Mac about the quality of loans underlying some $16.6 billion...