Goldman Sachs Settles Complaints over Foreclosure Lists
Investment bank Goldman Sachs Group Inc. has decided to settle complaints by the state of Massachusetts over its contribution to the subprime crisis that led to the overloading of residential properties into foreclosure lists.
Goldman agreed to pay $60 million in a settlement to resolve complaints filed by Massachusetts Attorney General Martha Coakley over claims that Goldman Sachs arranged very risky high-rate mortgage loans to borrowers with poor credit, leading to the addition of thousands of homes to forclosure lists.
The amount of $10 million will be given to the state and the rest will be spent to help solve the problems of thousands of borrowers whose houses have been added to foreclosure lists.
Amie Breton, spokeswoman for Massachusetts Attorney General Coakley, said that the settlement was one of the results of investigations on U.S. largest banks that originated mortgage loans and then bundled them into mortgage bonds to be sold to various investors.
Breton explained that the agreement with Goldman Sachs was the first settlement between a state and an investment bank related to the crisis of overloaded foreclosure lists.
The packaging of mortgage loans into securitized mortgage investments has been one of the major blocks to the federal government’s loan modification program. Many distressed homeowners applying for loan repayment schemes to save their houses from being added to foreclosure lists are being rejected because their loans have been repackaged for investors.
Michael DuVally, spokesperson for Goldman Sachs, said he is glad the problem with Massachusetts has been settled.
Housing analysts and economists argue that the subprime crisis caused the housing collapse that subsequently contributed to the economic downturn nationwide and worldwide. Many analysts even point to the subprime crisis, which led to long forclosure listings, as the sole initial cause of the nationwide economic crisis and the global recession.
Many critics, including legislators and economists, point to the greed of some Wall Street firms as the cause of the subprime market collapse. They claim that Wall Street firms pressured mortgage brokers to make a lot of loans that can be packaged into securities and then sold to investors.
The failure of mortgage lenders to screen borrowers led to the origination of loans for borrowers who cannot afford to pay and whose houses were later added to foreclosure lists.
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- Useless Solutions to Foreclosure Crisis
- Banks Said That Bailout Cash is for Foreclosure Loans not Payments
- Help for Foreclosure Properties in the Commercial Sector
