Goldman Sachs Passes First Test of Compliance with Mortgage Settlements, Monitor Reports

BOSTON, Sept. 16, 2016 /PRNewswire/ -- Goldman Sachs has cleared an initial hurdle towards meeting the consumer-relief requirements of its April 11, 2016, mortgage-related settlement agreements with the U.S. Department of Justice, three states, and three other regulatory bodies, Eric D. Green said today in his first report as independent Monitor of the consumer-relief portions of the agreements.

The five separate agreements settled potential and filed legal claims against Goldman Sachs regarding the marketing, structuring, arrangement, underwriting, issuance and sale of mortgage-based securities. Besides Goldman Sachs and the Department of Justice, the settling parties were California, Illinois, New York, the National Credit Union Administration Board and the Federal Home Loan Banks of Chicago and Des Moines. Goldman Sachs agreed to provide a total of $5.06 billion under the agreements, including consumer relief valued at $1.8 billion, to be distributed by the end of January 2021.

Professor Green, a professional mediator and a retired Boston University law professor, was named by the settling parties as independent Monitor with responsibility for determining whether Goldman Sachs fulfills its consumer-relief obligations. He has assembled a team of finance, accounting and legal professionals to assist in the task.

As with similar recent mortgage-related settlement agreements, the first step was to assess the bank's methodology for calculating the credit it should receive under the agreements for loan modifications and other kinds of relief meant to reduce the financial burden on consumers. Based on what amounted to a test sample of 100 loans, Professor Green concluded that the bank's approach was "logical and appropriate."

The initial test batch involved forgiveness or extinguishment of the debt owed to Goldman Sachs on five first-lien mortgage loans, five second-lien mortgage loans, and 90 junior-lien or unsecured mortgage loans, totaling $2,119,589 of reportable credit. The average first lien principal forgiven was $55,141. The 100 loans were located in 11 states. Notably, 66 of the loans were for homes located in Hardest Hit Areas, census tracts identified by the U.S. Department of Housing and Urban Development as containing large concentrations of distressed properties and foreclosure activities.

"In the coming months, we should get a clearer picture of how quickly Goldman Sachs is delivering on its consumer-relief obligations and how much of what kind of relief is being delivered," Professor Green said.

Goldman Sachs' future submissions for consumer-relief credit should be far larger than the initial 100-loan submission, Professor Green said, noting that the settlement agreements offer the bank "Enhanced Early Incentive Credit" of  150% for relief provided by November 30, 2016, and "Early Incentive Credit" of 115% for certain consumer-relief efforts offered or completed by June 30, 2017.

The Monitor expects that his first quarterly report on Goldman Sachs' consumer relief efforts will be issued on or around January 31, 2017.

The initial report is available at the Monitor's website at: http://goldmansachs.mortgagesettlementmonitor.com. The website provides further details about the settlement, plus contact information for Goldman Sachs, the Department of Justice, the Attorneys General of California, Illinois and New York, and agencies that provide legal or tax advice to consumers.

The Monitor's mailing address is: Monitor of the Morgan Stanley Mortgage Settlement, P.O. Box 10300, Dublin, OH 43017-5900, and the e-mail address is [email protected].

SOURCE Monitor: Eric D. Green