Goldman Sachs Settles Subprime Inquiry For $60 Million

BOSTON (AP) -- Investment banker Goldman Sachs has agreed to pay a $10 million fee and let some 714 Massachusetts homeowners rework their mortgages in a settlement reached as part of a state investigation into subprime lending.

Attorney General Martha Coakley said the rewritten mortgages could save about $50 million for residents across the state, the bulk of them living in Boston, Brockton, Lawrence, Springfield and Worcester.

Goldman will reduce the principal on first mortgages by up to 35 percent, and work with its affiliate, Litton Loan Servicing LP, on refinancing terms.

Borrowers will be contacted by their lender or should contact the person to whom they make their mortgage payment, Coakley said.

While Goldman did not admit to any legal wrongdoing, it provided capital for mortgage lenders who provided the high-risk loans to marginal borrowers. Goldman, in turn, packaged the loans into stock market commodities through a process known as "securitization."

Coakley said many of the loans were "destined to fail at conception."

She added: "We could have said we were going to go for years and look back further, but I think that further autopsy on this crisis -- including the role of all the parties -- is probably better done by an agency larger than the Massachusetts attorney general's office."

Company spokesman Michael DuVally said: "Goldman Sachs is pleased to have resolved this matter."

Story continues below

advertisement

The mortgage trade publication "Inside Mortgage Finance" labeled Goldman as the seventh-largest issuer of subprime mortgage-backed securities in 2006 and the 21st-largest in 2007.

But the Center for Public Integrity said Goldman provided financing to pivotal subprime lenders, including New Century Financial Corp. and Option One Mortgage, the No. 3 and No. 6 such lenders, respectively.

"These banks were deliberate enablers that bankrolled the type of lending that's now threatening the financial system," said Bill Buzenberg, executive director of the Washington watchdog organization.

Coakley, a potential U.S. Senate candidate, has mounted a series of legal actions as she has traced the state's subprime problem from street-level brokers to mortgage providers such as New Century and Option One.

Her investigation into Goldman Sachs elevated the probe to investment houses that turned the loans into tradable securities. Under the terms of the settlement, the state can no longer bring legal action against Goldman for its subprime activities.

Comments

[Rule Of Law]

Once more--

"Under the terms of the settlement, the state can no longer bring legal action against Goldman for its subprime activities­."

This is what they were after--and for the price, is the cheapest protection they'll ever buy!!!

[ephoenix5]

What? This is not really fair. Doesn't Gold Sachs own part of the Federal Reserve. Money damages is nothing to them -- "turn on the pressers." Come on -- the corruption needs to be exposed and dealt with. It is unacceptable how easily banks are getting away from any oversight over their activities. This is crap.

[Rule Of Law]

"Under the terms of the settlement, the state can no longer bring legal action against Goldman for its subprime activities­."

A small price to pay for this sort of protection. While million lose their homes to predatory financing, it's just business as usual for Goldman Sachs!

[jsgaetano]

$60 million is a drop in the ocean compared to what they ripped off... compared to how much they were "bailed out".

[DakotaMinnesota]

My favorite line is "many of the loans were 'destined to fail at conception­.'"

Destined or intended? I really believe the latter.

[freelyb]

There are no words that describe their pitiful souls.

[hollybork]

When are California, Nevada and Arizona going to go after the predatory lenders that made those states the biggest losers in the sub prime fiasco?

[dashingstream]

I think this is good news...fir­st state to actually go after these criminals.­..now if the rest would follow suit..and the Holder..

[Heavy]

I guess organized crime really does pay in the end.
Truly di s gu s t ing

[CraziesAreRunningTheShow]

We are all being Barney Franked... HARD

[Heavy]

Phil Gramm

[DakotaMinnesota]

Bushed.

[DakotaMinnesota]

They just got their steal for a steal.

George Herbert Walker IV (George W's 2nd cousin) was a partner at Goldman until 2006, when he made a surprize defection to Lehman Bros.

Sweet.

[martiniandabotoxchaser]

My goodness, it cost the firm two executive bonuses.

[sueinmn]

Goldman will reduce the principal on first mortgages by up to 35 percent


How much interest are they charging these people?

[rich misty]

Usury rates that Republicans cheer.

Republican Jesus went to the Temple, and he set up tables. He invited thieves to attend them, and he smiled as they extracted usury from the poor and homeless. He told his followers to support, and protect, The Money Changers.

http://www.youtube.com/watch?v=kNqQx7sjoS8

The Republican Bible is online.

"We will use money, taxpayer money, to bankrupt America" ~47 seconds in

[rabiddog6708]

Enough to make loan sharks blush.

[jsarets]

There's not enough money in circulation for Wall Street to adequately compensate the borrowers and investors to whom they sold unaffordable mortgages on inflated real estate.

There is no financial means by which Goldman Sachs can be punished in accordance with their fraudulent business practices.

The damage has been done, and all that's left to do is for borrowers and investors to come together on a plan for principal reduction.

The asset bubble created speculative wealth vastly in excess of realistic future income, and as much as we'd like the banks to cough up the wealth we thought we had, it never existed in the first place.

[rich misty]

Wall street is not a safe place to invest... It is an avenue of criminal activity where there are no cops, and hardly ever a crime actually reported.

But if you go there... You will lose your shirt.