NY Regulator Settles With Goldman And The Fed Orders Firm To Hire A Consultant
Goldman Sachs Group Incorporated has reached an agreement with a New York banking regulator, Benjamin Lawsky, to compensate victims who have been wrongfully foreclosed on and also to discontinue the practice of “robo-signing” documents, according to Reuters. The agreement also includes Ocwen Financial Corporation, who is in the process of buying Litton Loan Servicing LLP from Goldman for $264 million. The agreement will allow the sale of Litton, a Houston, Texas based mortgage loan servicing business, to come to fruition. With the banking regulator’s blessing by issuing a “no objection” letter to the Ocwen-Litton deal, it is expected to proceed smoothly creating the 12th largest mortgage servicer in the U.S.
The terms of the agreement essentially provided for compensation to those victimized by wrongful foreclosures, the implementation of new guidelines and training for employees dealing with the foreclosure process and the cessation of the practice known in the industry as “robo-signing”, which is the process of employees signing foreclosure documents en masse without having reviewed the documents or knowing anything about the case. Additionally, Goldman said that it would forgive 25% of the principal balance for mortgages that were sixty days overdue. The tab for that will be roughly $53 million.
In a related matter, The U.S. Federal Reserve has demanded that Goldman hire a consultant to examine the mortgage foreclosure practices of its Litton subsidiary during the 2009 and 2010 time period. The feds are seeking to fine the firm for its wrongful foreclosure practices, which included the practice of “robo-signing” foreclosure documents. It is alleged that Litton engaged in “a pattern of misconduct and negligence” during that period that resulted in homeowners being victimized by the wrongful foreclosures of their homes.