Goldman Sachs is meeting its consumer relief requirements as part of its $5 billion settlement reached in April over toxic mortgage bonds, a new report from the settlement’s monitor showed.
The report, published Friday by Eric Green, who serves as independent monitor of the settlement, showed that Goldman Sachs passed its first round of compliance testing for the consumer relief portion of its settlement with the Department of Justice; the New York and Illinois Attorneys General; the National Credit Union Administration, acting as conservator for several failed credit unions; and the Federal Home Loan Banks of Chicago and Seattle.
In addition to the $2.385 billion civil monetary penalty to the federal government, Goldman Sachs was also required to make $875 million in cash payments to resolve claims by other federal entities and state claims.
That $875 million included $575 million to settle claims by the NCUA, $37.5 million to settle claims by the Federal Home Loan Bank of Des Moines as successor to the Federal Home Loan Bank of Seattle, $37.5 million to settle claims by the Federal Home Loan Bank of Chicago, $190 million to settle claims by the state of New York, $25 million to settle claims by the state of Illinois and $10 million to settle claims by the state of California.
And on top of all of that, Goldman Sachs is also required to provide $1.8 billion in consumer relief in the form of loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country, as well as financing for affordable rental and for-sale housing throughout the country, according to the DOJ.
In Green’s first report, he said that his office tested 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, as is typically conducted first by the monitor in settlements such as this one.
Based on a test sample of 100 loans, Green determined that the bank’s approach thus far is “logical and appropriate.”
According to Green’s report, the first batch of testing 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, and totaled $2,119,589 of reportable credit.
Green’s report showed that the average first lien principal forgiven was $55,141.
Green’s report noted that 66 of the 100 loans tested were for homes located in Hardest Hit Areas, which are census tracts identified by the Department of Housing and Urban Development as containing large concentrations of distressed properties and foreclosure activities.
Green also noted that this is just an initial test, and while Goldman Sachs passed this first round of testing, the subsequent examinations will be much larger than this one.
“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,” Green said.
