Goldman Sachs pays near $1.2 billion to settle FHFA financial crisis lawsuit

Goldman Sachs will also buy back mortgage securities for $3.15 billion

Goldman Sachs is next in line for a mortgage crisis-related settlement with the Federal Housing Finance Agency (FHFA), and according to the agency, the price tag is 10 digits.

On August 22, the FHFA announced that Goldman Sachs will pay about $1.2 billion to settle claims that the firm did not adequately disclose the risks when selling mortgage bonds in the lead-up to the 2008 financial crisis. The two parties also announced that Goldman would buy back mortgage securities it had sold to Fannie Mae and Freddie Mac for $3.15 billion.

In a statement, the FHFA said that the settlement, “effectively makes Fannie Mae and Freddie Mac whole on their investments in the securities at issue.”

Goldman Sachs GC Gregory Palm, meanwhile, said, “We are pleased to have resolved these matters.” He also noted that much of the settlement would be covered by reserves the company held in the case of litigation.

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The two sides had been set to go to trial on September 29 to resolve two lawsuits the FHFA filed against Goldman Sachs in 2011. Before the settlement, attorneys for the two sides had been arguing whether Fannie Mae and Freddie Mac were aware of problems with the securities purchased from Goldman Sachs.

The FHFA filed suit against 18 different firms in 2011 concerning improprieties with mortgage-backed securities, but only four of those suits are still active, according to the Wall Street Journal. In total, the FHFA has brought in $17.3 billion as a result of the resolved lawsuits.

The largest sums from mortgage-backed securities cases thus far have come from Bank of America — which settled for $6.3 billion in cash in March 2014, plus repurchased securities — and JPMorgan Chase — which paid the FHFA $4 billion as part of its larger $13 billion settlement in November 2013.

Assistant Editor

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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