Morgan Stanley & Goldman Sachs Settle Federal Homeowner Foreclosure Complaints for $557 Million

Goldman Sachs (GS) and Morgan Stanley (MS) have agreed to collectively pay $557M to settle complaints accusing them of wrongfully foreclosing on homeowners. Under their respective agreements with the Federal Reserve, Morgan Stanley will pay $227M while Goldman will pay $330M.

Approximately 220,000 people who lost their homes due to “robo-signing” and other abuses could receive compensation as a result. Per the agreement with the two investment banks, they will pay $232 million in cash to compensate homeowners. This will conclude the loan files review against the two banks that were ordered in 2011. Cash payments will vary and may go as high as $125,000 to borrowers whose homes foreclosed in 2009 and 2010. $325M will go toward lowering mortgage balances and forgiving outstanding principal on home sales that made less than what borrowers owed on mortgages.

The deals stuck by Morgan Stanley and Goldman Sachs is similarly structured to the $8.5B one reached last week with JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), PNC Financial Services (PNC), MetLife Bank (MET), SunTrust (STI), Sovereign (SOV), Aurora, and US Bank. They are paying 3.8 million homeowners approximately $3.3 billion to conclude the foreclosure review. $5.2 billion is for forgiveness of principal and mortgage modifications. Ally Financial and HSBC are in talks to work out similar settlements. The Fed reports that now, over 4 million borrowers will receive cash compensation.

These latest mortgage settlements come nearly one year after the US government and 49 state attorneys general reached an “unprecedented” deal that involved Citigroup, Bank of America, Wells Fargo, JPMorgan Chase, and Ally Financial when they agreed to pay $25 billion to settle allegations of abusive foreclosure practices related to the housing market crisis.

Aside from the rob-signing debacle, which involved banks approving foreclosures without making sure that they were warranted or retaining workers who signed bogus signatures on fake documents to get houses through the foreclosure process faster, other wrongdoings that allegedly occurred include the use of deceptive tactics when offering loan modifications, the improper filing of documents in bankruptcy court, and not offering offer borrowers other options prior to foreclosure.

In other industry news, Goldman Sachs is thinking about selling its reinsurance. A main reason for this is Basel III capital rules, which compel banks to look at non-core businesses that are exiting. Goldman Sachs Reinsurance Group is with its securities division in New York.

Securities Fraud
Our securities fraud law firm is dedicated to helping our investor clients recoup losses they have suffered because of financial fraud. Your initial case evaluation with one of our experienced securities attorneys is free.

Goldman, Morgan Stanley pay $557M to settle mortgage case, AP/New York Post, January 16, 2013
Goldman, Morgan Stanley Set $557 Million Fed Mortgage Accord, Bloomberg, January 16, 2013

Goldman Mulls Majority Sale of Reinsurance Business, The Wall Street Journal/Red Lion Trader, January 16, 2013

More Blog Posts:
Credit Suisse Must Face ARS Lawsuit Over Subsidiary Brokerage’s Alleged Misconduct, Says District Court, Stockbroker Fraud Blog, January 11, 2013

Morgan Stanley, Citigroup, Wells Fargo, and UBS to Pay $9.1M Over Leveraged and Inverse ETFs, Stockbroker Fraud Blog, May 3, 2012

Principals of Global Arena Capital Corp. and Berthel, Fisher & Company Financial Services, Inc. Settle FINRA Securities Allegations, Stockbroker Fraud Blog, April 6, 2012

Contact Information