2011-09-01ft.com

In a settlement on Thursday, the Federal Reserve announced a formal enforcement action against Goldman "to address a pattern of misconduct and negligence relating to deficient practices" in loan servicing and foreclosure processing at its Litton Loan Servicing unit.

The New York State Banking Department separately announced that Goldman had agreed to write down $53m of the outstanding debt on about 150 mortgages it owned in New York. The action was a condition for Goldman to sell Litton to Ocwen Financial, another mortgage servicer, for about $260m in a deal that closed on Thursday. All three companies agreed to new standards for servicing and foreclosure...

But people close to the settlement said there was no release from future liability for any potential wrongdoing by any of the groups involved, including Goldman...

The Fed said it planned to demand monetary penalties from the servicers but fines are on hold pending the end of protracted negotiations between the industry, regulators and state attorneys-general. It directed Goldman to appoint consultants to review loan documents to see whether any homeowners suffered as a result of bad practices.


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