The New York State Attorney General’s office announced Monday it has reached a$5 billion settlement with Goldman Sachs over the bank’s deceptive lending practices leading up to the financial crisis in 2008.
Of the $5 billion, the settlement earmarks $480 million to be allocated for consumer relief and mortgage assistance in New York, including $50 million for the creation and preservation of affordable rental housing, $220 million for debt restructuring, $30 million for land banks and land trusts, $30 million for code enforcement, and $150 million in principal reduction for distressed borrowers. In addition to the $480 million, the state will receive $190 million in cash.
“These dollars will immediately go to work funding proven programs and services to help New Yorkers keep their homes and rebuild their communities,” New York Attorney General Eric Schneiderman said in a statement accompanying the settlement.
“This settlement, like those before it, ensures that these critical programs — such as mortgage assistance, principal forgiveness, and code enforcement — will continue to get funded well into the future, and will be paid for by the institutions responsible for the financial crisis.”
The remaining $4.3 billion or so in the settlement will be distributed to the federal government and other states, a spokesman for the NY Attorney General’s office told The Huffington Post.
In a “statement of facts“ released alongside the settlement, the bank acknowledges it misrepresented the quality of the mortgage loans it sold to investors, and did not adequately screen out questionable loans.
The document shows the bank was aware of the increasingly precarious nature of the loans it was selling.
In 2006, for example, after an equity research report recommended investors purchase stock in the mortgage company Countrywide, Goldman’s head of due diligence — who had just overseen due diligence on six pools of Countrywide loans — remarked in an internal email, “If they only knew…”
Nevertheless, the bank did not disclose to investors it had identified certain issues with the Countrywide loans.
Stock in Goldman Sachs climbed two percent following the settlement announcement.
source: huffingtonpost.com by Ryan Grenoble