Banking firm Goldman Sachs on Friday agreed to settle a US regulator’s misleading claims, involving US mortgage companies Fannie Mae and Freddie Mac, by worth USD 1.2 billion.
Goldman agreed to pay USD 3.15 billion to repurchase the high risk mortgage securities from Fannie and Freddie as a part of the settlement with the Federal Housing Finance Agency (FHFA), the conservator for the two mortgage finance firms controlled by the government.
The US regulator has claimed that the New York-based bank had sold Fannie Mae and Freddie Mac faulty mortgage bonds during the 2008 financial crisis.
Under the new agreement, the $1.2 billion is the amount that will be paid by Goldman, cutting the estimated current value of the mortgage securities that are being repurchased from Fannie and Freddie. The bank will pay about USD 1 billion to Fannie Mae and USD 2.15 billion to Freddie Mac.
In its initial case against Goldman Sachs, the FHFA had accused the bank of misleading both the mortgage companies in the sale of over USD 11.1 billion in highly risky mortgage securities sold to Fannie and Freddie between 2005 and 2007.
Meanwhile, Goldman Sachs has out rightly refuted the allegations. The company has also not accepted any wrongdoing against it. According to the company officials, the management is happy with the development.
“We are pleased to have resolved these matters,” Gregory Palm, Goldman’s general counsel, said in a statement.
This is the latest deal by Fed over actions related to the financial meltdown of 2008 in the United States. The major reason behind the financial crisis was the heavy sale of risky mortgage securities. The total securities were sold for USD 196 billion.
In 2011, the US regulator had filed legal case against 18 financial institutions for selling high risk securities to both Freddie and Fannie. Several banks including Goldman Sachs, Citigroup, JP Morgan and Bank of America were accused of being involved in the sale of risky mortgage securities finances.