Goldman Sachs and Morgan Stanley Agree $557M Settlement in Consumer Banking Abuses

Washington, DC: The Federal Reserve has reached a settlement with Morgan Stanley and Goldman Sachs over alleged loan servicing and foreclosure abuses. Under the terms of the settlement, reported by CNNMoney.com, Morgan Stanley will provide $97 million in direct cash payments to borrowers and $130 million worth of other relief, including loan modifications and the forgiveness of deficiency judgments. Goldman will pay $135 million to borrowers with a further $195 million provided as relief.

The settlement provides for over 220,000 homeowners who held mortgages with the two banks' former subsidiaries: Goldman's Litton Loan Servicing and Morgan's Saxon Mortgage Services, and subsequently faced foreclosure in 2009 and 2010. This settlement follows the $8.5 billion agreement announced last week by the Federal Reserve and the Office of the Comptroller of the Currency with 10 other banks over foreclosure issues.

Goldman Sachs was ordered to review its subsidiary' foreclosure practices in September 2011, as was Morgan Stanley in April 2012. Those reviews were not initiated and will now be scrapped as a result of this settlement deal.

Neither Morgan Stanley nor Goldman are in the mortgage-servicing business now, with Morgan Stanley having sold Saxon Mortgages in 2012.

As a result of the settlement deals with the Federal Reserve, over four million borrowers will split a total of $3.5 billion in cash compensation, with payments ranging from a few hundred dollars to potentially as much as $125,000 in a small percentage of cases. Those eligible are expected to be contacted by the end of March, regulators said. CNNMoney.com

Legal Help

If you have a similar problem and would like to be contacted by a lawyer at no cost or obligation, please fill in our form.
Published on Jan-16-13