Goldman Sachs Group, Inc. announced last week they had reached an agreement to resolve an ongoing investigation of the Residential Mortgage-Backed Securities Working Group. The agreement was attained after more than seven years after the worst financial crisis hit the U.S. in which Goldman Sachs played a role.
The agreement will conclude any real or potential civil claims from the Department of Justice, New York and Illinois Attorneys General, National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle.
Goldman Sachs role in churning out faulty mortgages and securities-backed by home loans to borrowers who couldn’t afford them was actually much smaller than other banks. In comparison, Bank of America’s settlement agreement was $16.6 billion and JPMorgan Chase paid $13 billion. In total, banks have paid more than $40 billion in settlements to resolve claims against them.
Under this agreement, which is still being negotiated, Goldman Sachs will pay a $2.385 billion civil monetary penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief, or what is know as “soft money”. “Soft money” is money intended for loan modifications or foreclosure relief for consumers harmed by the bad mortgages. The “soft money” portion in Bank of America’s settlement was $7 billion due to BOAs writing far more faulty mortgages to consumers. It’s unclear, at this time, exactly how Goldman Sachs consumer relief will be doled out and which borrowers or consumers will benefit.
Consumer relief can also come in the forms of; principal forgiveness to homeowners who are underwater (owe more than what their home is worth), foreclosure prevention, distressed borrowers, financing for construction, housing quality improvement programs, rehabilitation and preservation of affordable housing.
A leading global investment bank, Goldman Sachs provides a wide range of financial services and has a diversified client base (includes corporations, financial institutions, governments and high-net-worth clients). Their New York headquarters was founded in 1869 with offices in all the major financial centers around the world. The $5.1 billion settlement will reduce Goldman’s earnings approximately $1.5 billion in 2015 fourth quarter on an after-tax basis. Their third quarter reported a $1.3 billion profit.
In 2014, Goldman Sachs paid nearly $3 billion to the Federal Housing Finance Agency that settled claims of faulty mortgage securities involving Fannie Mae and Freddie Mac.
Last week, Goldman Sachs also agreed to a $15 million fine to settle Securities and Exchange Commission allegations of violating federal regulations that dictate how brokers can arrange stock short sales for clients. As part of the settlement, Goldman Sachs neither admitted nor denied the allegations.
If you are facing foreclosure, have a foreclosure-related issue, or need assistance securing your loan modification, call our Colorado foreclosure defense attorneys at 303-618-2122.
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