Goldman to Settle All FHFA Claims By Repurchasing the RMBS for $3.15 billion

Mr Lloyd C. Blankfein, Chairman and CEO at Goldman Sachs Group Inc, Lord Patten of Barnes, and Mr Lionel Barber, Editor of the Financial Times. Photo by Financial Times.

By Tanvi Acharya, Associate Editor for USDR


Goldman, Sachs & Co.  recently announced that it has reached agreements with Federal Housing Finance Agency (FHFA). As a part of it, Goldman will repurchase the residential mortgage-backed securities (RMBS) for $3.15 billion.

FHFA is the conservator for Fannie Mae and Freddie Mac. Goldman will resolve all federal and state securities law claims brought by FHFA with respect to the RMBS purchased by Fannie Mae and Freddie Mac over the 2005-2007 period.

Gregory K. Palm, Executive Vice President and General Counsel of The Goldman Sachs Group, Inc., stated “We are pleased to have resolved these matters.”

The settlement conforms to the recent pattern of lawsuit settlements made by large global banks, and Fitch Ratings says the payment will have no impact on Goldman Sachs’ ratings. (‘A’/’F1’ with a Stable Outlook)

The economic value of the settlement is estimated at $1.2 billion, which reflects the difference between the $3.15 billion cash payment and the GSEs’ net carrying value of the securities repurchased, which Goldman will be able to sell at a later date.

The approximate value of the settlement represents between 10%-11% of the original face value of affected mortgage-backed securities, which is roughly in line with other institutions that have recently settled.

Sixteen of the FHFA’s suits against large financial institutions have now been settled, with three cases remaining. Fannie Mae and Freddie Mac have booked sizable litigation gains related to the FHFA suits in second-half 2013 and year-to-date 2014.

SOURCE: BusinessWires and Fitch Ratings

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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