{"id":5974,"date":"2016-04-09T00:00:00","date_gmt":"2016-04-09T05:00:00","guid":{"rendered":"https:\/\/institutionalinvestorsecuritiesblog.blawgcloud.com\/2016\/04\/goldman_sachs_will_pay_506b_ov"},"modified":"2022-05-18T14:49:14","modified_gmt":"2022-05-18T19:49:14","slug":"goldman-sachs-will-pay-506b-ov","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/goldman-sachs-will-pay-506b-ov\/","title":{"rendered":"Goldman Sachs Will Pay $5.06B Over Mortgage-Backed Securities Practices"},"content":{"rendered":"

Goldman Sachs (GS) has settled a mortgage case <\/a>brought by the U.S. Department of Justice accusing the firm of deceptive mortgage practices leading up to the 2008 financial crisis. As part of the deal, Goldman will pay $5.06B to resolve the charges. According to the DOJ, the bank also admitted that it issued representations that were \u201cfalse and misleading\u201d to prospective investors about the MBS that were up for sale. Details of the deal were announced in January after an agreement was reached in principal. <\/p>\n

In a statement of facts, Goldman said that \u201csignificant percentages\u201d of the mortgages it bundled with securities sold between \u201905 and \u201907 were not in line with the information provided to investors about the loans. The bank\u2019s Mortgage Capital Committee approved every residential mortgage-backed security it assesses between December \u201905 and \u201907 even though they were aware that a lot of the home loans contained compliance and credit defects. <\/p>\n

The settlement shows that Goldman was aware that a lot of the subprime loans it was packaging into securities could be defective, including an RMBS it created in \u201906 using loans made by Countrywide Financial, which was the largest subprime loan provider. It was during this time that a Goldman manager issued an equity research report recommending that the stock be brought. Responding to the report, the bank\u2019s due diligence head that had supervised the scrutiny of several Countrywide mortgage pools replied, \u201cIf only they knew.\u201d <\/p>\n

The government said that 70% of total loan pools were not examined for problems even though in one bond pool about 25% of loans that were examined were dropped because their quality was poor. For example, in 2006, Goldman notified investors via marketing materials that one underwriter in particular was dedicated to \u201cquality over volume\u201d when it came to the loans even though its own analysis determined that the underwriter, a Fremont General Corp unit, applied \u201coff market\u201d guidelines. In early 2007, the Fremont unit was shut down after the Federal Deposit Insurance Corp. said that the lender allowed people who couldn\u2019t afford to pay back the mortgages to have them anyways.<\/p>\n

Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Goldman Sachs (GS) has settled a mortgage case brought by the U.S. Department of Justice accusing the firm of deceptive mortgage practices leading up to the 2008 financial crisis. As part of the deal, Goldman will pay $5.06B to resolve the charges. According to the DOJ, the bank also admitted that it issued representations that […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3752,3947,3757],"tags":[],"class_list":["post-5974","post","type-post","status-publish","format-standard","hentry","category-financial-firms","category-goldman-sachs","category-mortgagebacked-securities"],"yoast_head":"\nGoldman Sachs Will Pay $5.06B Over Mortgage-Backed Securities Practices — Investor Lawyers Blog — April 9, 2016<\/title>\n<meta name=\"description\" content=\"Goldman Sachs (GS) has settled a mortgage case brought by the U.S. Department of Justice accusing the firm of deceptive mortgage practices leading up to — April 9, 2016\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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