by Kyle Colona on September 2, 2011
In the wake of the recently announced settlement between Goldman Sachs and the NY State Superintendent of Banking and Insurance, the Federal Reserve has ordered Goldman Sachs to hire a consultant to review the mortgage practices of Litton Loan Servicing, the mortgage servicing giant that will soon be spun off by Goldman to Ocwen Federal Bank.
According to the Reuters’ report on this case, the Fed’s decree alluded to a “pattern of misconduct and negligence.” That being said, the Fed’s action more than likely was made in conjunction with the probe that the NY state regulator had been conducting and the financial community should not be surprised if another settlement with the federal regulators is soon to follow.
This case is part of the ongoing probe of large banks that have been targets of state and federal regulators over the so-called “robo-signing” issue since many problems attached to the financial crisis of 2008 were triggered in large part by bad mortgages in the US and bonds collateralized by those loans.
In a related story by the Huffington Post, it was noted that the investment bank has “been trying for months to exit the retail mortgage business that has been a source of prolonged headaches for other institutions.”
In the end, the consultant will be tasked with reviewing Litton’s foreclosure activity in 2009 and 2010, to identify borrowers who suffered financial losses due to improper practices and Goldman will have to reimburse those customers. The firm is also responsible for any fines that the Fed may assess after the review is complete.
Kyle Colona is a contributing writer for CompliancEX and a NY based freelance writer.