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Mass. Homeowners Get $50M in Foreclosure Relief in Goldman Sachs Settlement

Hundreds of homeowners in Massachusetts will get foreclosure relief in the form of more affordable restructured home loans, as a result of a settlement between the state and Goldman Sachs & Company, over the investment firm's sub-prime lending practices.

Under the settlement announced Monday by Massachusetts Attorney General Martha Coakley, Goldman Sachs agreed to provide $50 million in loan re-structuring for about 700 Massachusetts homeowners who are struggling with sub-prime mortgages held by Goldman entities. Specifically, Goldman will:

• Reduce the principal of first mortgages by up to 25 to 35%.
• Reduce the principal of second mortgages by up to 50% or more.
• Require borrowers whose first mortgage is "significantly delinquent" to "make a reasonable monthly loan payment while seeking refinancing or until they sell their home. If after six months, a borrower is still unable to find financing or sell his or her home, Goldman will reduce the principal owed on the existing loan to assist the borrower," according to a Press Release from the Massachusetts Attorney General.  

The settlement is part of the state's investigation into the securitization of subprime mortgages given to the state's consumers, a probe that began in late 2007. In addition to the $50 million in loan re-structuring, Goldman Sachs will pay an additional $10 million to the state as a penalty.

According to the Wall Street Journal, yesterday's agreement is a small victory in the ongoing investigation over the undoing of the real estate market: "The settlement follows a probe into how major Wall Street players were involved in writing loans to borrowers with poor credit, and then underwriting securities made up of those loans. Goldman Sachs and other banks were accused of encouraging underwriting of risky loans."

• Mass. AG Press Release on Goldman-Sachs Settlement (Mass.gov)
• Boston Herald: $50M Home Rescue Pact
• Wall Street Journal: Goldman to Pay Mass AG $60M to Settle Subprime Probe - Source  
• Foreclosure and Alternatives (FindLaw)
• Real Estate Law FAQs (provided by Law Office of Kimberly A. Abrams & Associates, P.A.)

Full post as published by FindLaw's Common Law on May 12, 2009 (boomark / email).