American International Group Inc. says it’s set aside $178 million to settle charges by bank regulators that its subprime mortgage lending subsidiaries failed to adequately evaluate the credit of some borrowers and charged high broker and lender fees.

The agreement covers mortgages originated between July 2003 and May 2006 in the name of AIG’s subsidiary, AIG Federal Savings Bank, by Wilmington Finance Inc.

According to the Office of Thrift Supervision, Wilmington Finance provided “extensive mortgage loan origination services” for AIG FSB, which “failed to manage and control the (outsourced) lending activities … with appropriate consideration to consumer protection issues.”

OTS examiners concluded that a number of Wilmington Financial originations had negative financial impacts for borrowers because of inadequate consideration of the borrower’s credit worthiness, or because of large broker or lender fees.

Under a program that’s to be implemented by the end of the month, AIG FSB will be required to identify and provide assistance to borrowers who are at risk of losing their homes in foreclosure. The program’s primary objective is to provide affordable loans to borrowers facing a high risk of foreclosure, the OTS said. Some borrowers may qualify for a refund of part of their fees rather than for a new loan.

Borrowers who believe they may be eligible for assistance under the program have been advised to contact AIG FSB customer service.

AIG Inc. said Friday that it established a $128 million reserve in the first quarter to cover the expected costs of the settlement, and estimates another $50 million will be set aside in the second quarter. The $178 million reserve is also intended to cover the cost of a $15 million donation to nonprofit groups that provide financial literacy and credit counseling that is also part of the settlement, the company said.

The settlement, which also applies to AIG subsidiary American General Finance Inc., requires that the reserves be increased if the number of borrowers qualifying for assistance exceeds initial estimates.

AIG reported last month that first quarter operating income for its domestic consumer finance operations, including AIG FSB and AGF, decreased by $184 million, or 93 percent, from the same period of 2006.

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