Goldman Sachs to be fined over mortgage practices
NEW YORK — Goldman Sachs has agreed to pay a fine and reform some controversial mortgage practices that sparked the “robo-signing” scandal, the US Federal Reserve said on Thursday.
The Fed’s announcement did not reveal the size of the fine, which stemmed from foreclosures carried out in 2009 and 2010 by Litton Loan Servicing, a mortgage-servicing business formerly owned by Goldman.
Goldman has also been ordered to conduct a review of the foreclosures “to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures,” the Fed said in a statement.
“The Federal Reserve believes monetary sanctions are appropriate and plans to announce monetary penalties,” it added.
“Goldman Sachs has acknowledged in today’s action that it will be responsible for satisfying any civil money penalty that the Board of Governors (of the Federal Reserve) could have assessed against Litton for its conduct.”
Many foreclosures initiated by Litton were rushed through the courts without the proper paperwork, and Litton employees did not review each borrower’s case before seeking to repossess their home, the Fed said in its 36-page agreement with Goldman.
Litton, the 23rd-largest mortgage servicer in the United States, launched more than 135,000 foreclosure actions in 2009 and 2010, a time when many borrowers fell behind on their loans, the Fed said.
Goldman sold Litton to another company, Ocwen Financial Corporation, as of Thursday and has exited the mortgage-servicing business, the Fed said.
Goldman announced it had completed the sale but provided no details.
The Wall Street Journal reported earlier on Thursday that the terms of the settlement were a condition for the sale of Litton to be approved by US regulators.
The newspaper said the Goldman agreement could be a template for reforming other lenders implicated in the robo-signing scandal, in which bank employees signed off on foreclosure agreements without reviewing case files.
In some cases, homeowners who had made all the payments on their mortgages were handed eviction papers, leading to nationwide outrage.
The country’s biggest banks are in talks with the federal government and the states on a gigantic settlement, reportedly around $20 billion, over the robo-signing scandal.
Mortgage servicers are companies that collect monthly house payments and pass them on to investors and lenders, or process foreclosures when the homeowners go into default.
The robo-signing scandal erupted when such companies became overwhelmed with the flood of defaults that followed the 2008 financial crisis and the ensuing recession.
The banks have said that only a tiny fraction of foreclosures were wrongful, and in most cases the homeowners were truly in default on their loans.