Goldman mortgage deal with federal agency could reach $1.25 billion: source

NEW YORK Sat Jul 26, 2014 2:24pm EDT

Goldman Sachs Group, Inc. Chairman and Chief Executive Lloyd Blankfein moderates a panel discussion at the North American Energy Summit in the Manhattan borough of New York, June 10, 2014.   REUTERS/Adam Hunger

Goldman Sachs Group, Inc. Chairman and Chief Executive Lloyd Blankfein moderates a panel discussion at the North American Energy Summit in the Manhattan borough of New York, June 10, 2014.

Credit: Reuters/Adam Hunger

NEW YORK (Reuters) - A deal to resolve a U.S. regulator's claims against Goldman Sachs Group Inc over mortgage-backed securities sold to Fannie Mae and Freddie Mac leading up to the financial crisis could cost the bank between $800 million and $1.25 billion, according to a person familiar with the matter.

The person said Goldman Sachs is discussing a settlement with the Federal Housing Finance Agency (FHFA), which filed 18 lawsuits against Goldman and other banks in 2011 over about $200 billion in mortgage-backed securities that later went sour.

Goldman Sachs and the FHFA declined to comment on Saturday.

The upper end of the range matches the amount Morgan Stanley agreed to pay in February to resolve the FHFA's claims against it. The person familiar with the matter said the negotiations are still ongoing, and the final amount of any deal remains fluid. The person was not authorized to speak publicly on the matter.

The Wall Street Journal first reported the settlement talks.

The FHFA has recovered $16.1 billion in agreements with other banks. Goldman is among four banks still facing FHFA mortgage-related lawsuits, along with HSBC Holdings PLC, Nomura Holdings Inc and Royal Bank of Scotland Group PLC.

On Wednesday, Goldman, HSBC and Noumra argued that U.S. District Judge Denise Cote in New York, who is overseeing the litigation, should reconsider her decision that the agency did not wait too long in suing the banks.

The renewed bid to dismiss the lawsuits based on timeliness issues stemmed from a June ruling from the U.S. Supreme Court. The court ruled in an environmental case that a federal law did not preempt a state-law statute that placed time limits on bringing a lawsuit that applied even if a plaintiff did not know it had a claim.

But Cote warned the banks on Wednesday they faced a "steep hill to climb."

Goldman Sachs and HSBC are scheduled to face trial Sept. 29. A trial in the Nomura case is due for Jan. 26, 2015.

The case is Federal Housing Finance Agency v. HSBC North America Holdings Inc, U.S. District Court, Southern District of New York, No. 11-6189.

(Reporting by Lauren Tara LaCapra; Additional reporting by Nate Raymond; Writing by Joseph Ax; Editing by Bernard Orr)

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Comments (4)
JamesChirico wrote:
Sell your best advice as investing in mortgage securities, then take a short position in a major way making billions is fraud. Goldman, Chase, used oil future contacts, pennies on the dollar to drive oil prices up to $140/bbl in the summer of 2008. This was done to have more Americans default on their mortgages ensuring their short position was a bigger winner. They should not only be fined, they should be jailed for fraud and commodity price manipulation (Hunt bros went to jail).

Jul 26, 2014 4:38pm EDT  --  Report as abuse
leoflor wrote:
800 million is a joke of a fine, Goldman was huge part of this scam, along with Countrywide, GMAC/RFC Financial and other subprime security peddlers. Between the credit default swaps, TARP, and fire selling assets back to friends they should be put away!

Jul 26, 2014 6:30pm EDT  --  Report as abuse
CharlesReed wrote:
We see these quasi government agencies getting paid back for bad securities however what about the fraudulent activity in the FHA and VA programs, where the two were tricked into purchasing properties that the foreclosing party did not own, which resulted in a lost for the US taxpayers? Plus the FHA and VA paid out these insurance claims to these foreclosing entities, causing even more financial lost for the US taxpayers!

Jul 26, 2014 8:05pm EDT  --  Report as abuse
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