Goldman, Morgan Stanley to also settle on foreclosures -sources

Tue Jan 8, 2013 6:42pm EST

Jan 8 (Reuters) - Goldman Sachs Group Inc and Morgan Stanley are expected to agree as soon as this week to a $1.5 billion settlement with federal regulators over botched foreclosure claims, two sources familiar with the matter said on Tuesday.

The accord would come on the heels of a separate $8.5 billion settlement announced on Monday with 10 bigger mortgage servicers, including America Corp, Citigroup Inc, JPMorgan Case & Co, Wells Fargo & Co.

HSBC Holdings Inc, Ally Financial Inc, EverBank Financial Corp and OneWest Bank FSB have also said they are in settlement discussions with the Federal Reserve and the Office of the Comptroller of the Currency.

The two sources did not want to be identified because they were not authorized to speak publicly about the settlement.

A spokeswoman for the Federal Reserve reiterated a previous statement that the Fed and the OCC continue to work with other parties outside of Monday's accord to reach similar agreements. Representatives of the OCC did not immediately respond to a request for comment.

The expected settlement for Goldman and Morgan Stanley stems from mortgage-servicing businesses that the two investment banks purchased in the run-up to the subprime mortgage crisis, and have since sold. Goldman had owned Litton Loan Servicing LP and Morgan Stanley owned Saxon Capital Inc.

The Federal Reserve had ordered the two firms to conduct case-by-case reviews of foreclosures after widespread mistakes were discovered across the industry in the way U.S. banks had processed home seizures. The settlement would end those reviews and result in at least $1.5 billion in cash and assistance for borrowers.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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