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Goldman Sachs to pay $5B in settlement over sale of RMBS

New York Attorney General Eric Schneiderman on April 11announced a $5 billion settlement with Goldman Sachs Group Inc. over its sale of residentialmortgage-backed securities backed by large numbers of loans from originatorswhose mortgage loans contained material defects leading up to the financialcrisis.

The settlement includes $670 million that will be allocatedto New York State, including $480 million worth of creditable consumer relief and$190 million in cash.

The National Credit Union Administration announced April 11that the settlement includes $575 million to settle its claims against GoldmanSachs.

The settlement resolved two lawsuits filed by NCUA asliquidating agent for U.S.Central Federal Credit Union, Western Corporate Federal Credit Union and against Goldman Sachs for losses incurred as a result of thepurchases of the securities by the corporate credit unions, which later failed.

NCUA said it uses net proceeds from recoveries to pay claimsagainst five failed corporate credit unions, including those of the TemporaryCorporate Credit Union Stabilization Fund.

The settlement includes an agreed-upon statement of facts inwhich Goldman Sachs acknowledged that it securitized thousands of Alt-A, andsubprime mortgage loans and sold the resulting residential mortgage-backedsecurities to investors for tens of billions of dollars. During the course ofits due diligence process, Goldman Sachs received pertinent informationindicating that significant percentages of the loans reviewed did not conformto the representations it made to investors.

Goldman Sachs also failed to disclose negative informationthat it obtained regarding the originators' business practices. In certaincircumstances, Goldman re-evaluated loan grades and directed that such loans bewaived into the pools to be purchased or securitized, Schneiderman said.