Tomahawk, WI 08/25/2014 (Basicsmedia) – Goldman Sachs Group Inc. (NYSE:GS) has come to a consensual agreement with authorities in the U.S. consequently agreeing to pay a total of $3.15 billion as settlement for claims associated with the sale of bonds to Fannie Mae and Freddie Mac according to Bloomberg’s Su Keenan.
The Federal Housing Finance Agency had accused Goldman Sachs Group Inc. (NYSE:GS) of selling low-quality mortgage bonds during the financial crisis. The payment represents the largest bill for the bank as it is estimated to be $1.2 billion more than what the bonds are now worth. There is also a possibility that Goldman Sachs may opt to hold the bonds awaiting to see if they will increase in value, as one of the ways offsetting the total settlement cost.
“[…] the deal aims to resolve all Federal and states security claims related to residential mortgage-backed securities bought by Fannie Mae and Freddie Mac from 2005 to 2007,” said Mrs. Keenan.
Goldman Sachs Group Inc. (NYSE:GS) settlement follows on the heels of Bank of America Corp (NYSE:BAC) that reached an agreement with the Department of Justice to pay a total of $16.65 billion to settle its shoddy Mortgage backed securities offered during the financial crisis. Goldman Sachs joins the list of 15 banks that have settled their claims with FHFA in a list of 18 firms that were sued.
The $1.2 billion figure is a big blow for the bank considering it had made a payment of $550 million back in 2010 to settle allegations of marketing a synthetic collateralized debt notably referred to as ‘Abacus case’ with the SEC. The settlement package could have been higher had the claims originated from subprime loans although the bank did subprime mortgages that were sold to investors in the form of bonds.
Goldman Sachs Group Inc. (NYSE:GS) has always maintained that it did all within its powers to review mortgages that were sold to customers. The Housing agency lawyers, on the other hand, presented evidence that claimed Goldman Sachs was aware of the weaknesses in the subprime mortgage market. Goldman Sachs is planning to settle the matter once and for all after setting aside enough money to cover the costs.