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Huge MBS Settlement at Goldman Sachs

The Goldman Sachs Group Inc. has agreed to settle for more than $5 billion allegations tied to residential securitizations.

The New York-based financial services firm disclosed on Thursday that an agreement in principle had been reached.

By agreeing to the settlement, Goldman Sachs resolves actual and potential civil claims related to an ongoing investigation.

A successful negotiation of definitive documentation still has to be negotiated, the announcement indicated.

At issue is Goldman Sach’s role in the securitization, underwriting and sale of residential mortgage-backed securities from 2005 to 2007.

On the other said of the agreement is the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force.

The task force includes the U.S. Department of Justice, New York Attorney General, Illinois Attorney General, National Credit Union Administration, Federal Home Loan Bank of Chicago and Federal Home Loan Bank of Seattle.

“We are pleased to have reached an agreement in principle to resolve these matters,”  Goldman Sachs Group Chairman and Chief Executive Officer Lloyd C. Blankfein said in the news release.

The settlement calls for the investment banker to
pay a $2.385 billion civil money penalty.

In addition, $0.875 billion
in cash payments will be made, while another $1.8 billion will be utilized for consumer relief.

The consumer relief portion of the agreement will “be in the form of principal forgiveness for underwater homeowners and distressed borrowers; financing for construction, rehabilitation and preservation of affordable housing; and support for debt restructuring, foreclosure prevention and housing quality improvement programs, as well as land banks,” the statement said.

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