Attorney General Martha Coakley’s Office has reached a $60 million settlement with Goldman Sachs & Co., stemming from the office’s ongoing investigation of subprime lending and securitization markets, that includes a $10 million payment to the commonwealth and a further $50 million in loan modification funds.
The loan modification funds will be used as follows: For homeowners with loans held by Goldman entities, Goldman has agreed to reduce the principal of first mortgages by 25 percent to 35 percent and second mortgages by 50 percent or more. Borrowers whose first mortgage is significantly delinquent will be required to make a "reasonable" monthly loan payment while seeking refinancing or until they sell their home, according to a statement from Coakley’s office. If after six months a borrower is still unable to find financing or sell their home, Goldman will reduce the principal owed on the existing loan to assist the borrower.
Additionally, for loans not currently held by Goldman, but which are serviced by Goldman’s affiliated servicing company, Litton Loan Servicing LP, Goldman has agreed to assist qualified borrowers with finding refinancing options and other alternatives to foreclosure.
"Since I became attorney general, our office has sought accountability at all levels of the subprime lending crisis," Coakley said. "We are pleased that Goldman cooperated during this investigation and that it has committed to working with our office to help Massachusetts borrowers who are struggling with unsustainable subprime loans."
The attorney general’s office has been investigating the role of investment banks in the origination and securitization of subprime loans in Massachusetts since December 2007. Since the investigation began, Coakley’s office has sued Fremont Investment & Loan, as well as Option One and its parent H&R Block, alleging unfair, deceptive and predatory lending practices, and obtained preliminary injunctions against those companies. The attorney general’s office previously completed other investigations relating to the current economic crisis, and recovered more than $75 million from resolutions with UBS, Morgan Stanley, Citibank and Merrill Lynch regarding their sale of auction rate securities to Massachusetts towns, cities and governmental entities.
