Bloomberg News

Goldman Sachs Settles Fed Claim Over Foreclosure Practices

September 01, 2011

(Updates with statement on penalties in fourth paragraph.)

Sept. 1 (Bloomberg) -- Goldman Sachs Group Inc., which completed the sale of its Litton Loan Servicing subsidiary today, agreed to pay future penalties and review foreclosures so that victims of wrongful seizures can be compensated.

The firm signed a consent order to “address a pattern of misconduct and negligence relating to deficient practices in residential mortgage loan servicing and foreclosure processing” involving Litton, the Federal Reserve Board said in a statement today.

“The review is intended to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process,” according to the statement.

Goldman Sachs agreed to retain an independent consultant to review foreclosures initiated by Litton that were pending in 2009 or 2010. The New York-based firm will also be responsible for paying any related penalties imposed on Litton by the Fed, which said in April sanctions are appropriate and may be levied.

Goldman Sachs agreed in June to sell Litton to Ocwen Financial Corp. for about $264 million in a deal that was completed today. The announcement came two months after Goldman Sachs wrote down the value of the mortgage-servicing business by about $200 million.

--Editors: Kevin Costelloe, David Scheer

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scheer at dscheer@bloomberg.net


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