Goldman Sachs has finally agreed to a whopping USD 1.2 billion settlement with the US mortgage giants Freddie Mac and Fannie Mae, aiming to resolve the claims of misleading.
The Federal Housing Agency (FHFA) on Friday announced the settlement overseeing Fannie and Freddie.
Sources say before the 2007 housing market crisis, the New York based banking firm has sold high-risk securities to both the mortgage companies between 2005 and 2007.
Under the settlement, Goldman Sachs will pay USD 3.15 billion to Fannie and Freddie to buy back the securities from them. FHFA says Goldman has to pay USD 1.2 billion as an extra amount as there was a difference in what the banking firm was paying and the securities’ current value. This means it is paying USD 1.2 billion more than what the securities cost now.
Meanwhile, the top authorities of Goldman expressed satisfaction over the long pending deal.
Gregory Palm, general counsel of Goldman Sachs Group Inc., said that the firm is happy and satisfied as the issues have been resolved now.
The settlement between the Goldamn Sachs and other two mortgage firms comes as the latest fed agreement over actions related to the 2008 financial recession in the United States.
The major reason behind the financial crunch was the heavy sale of high risk mortgage securities. The process that led the US economy to its worst phase also triggered collapse of the housing market in 2007. The total securities were sold for USD 196 billion.
In 2011, the FHFA had taken legal actions against 18 financial institutions for selling high risk securities to Freddie and Fannie.
Many banks including Goldman, Bank of America, JP Morgan and Citigroup were accused of being involved in the sale of risky mortgage securities.
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