Monday, August 25, 2014
The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, announced it has reached a settlement with Goldman Sachs, related companies and certain named individuals. The settlement addresses claims alleging violations of federal and state securities laws in connection with private-label mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac between 2005 and 2007.
Under the terms of the settlement, Goldman Sachs will pay $3.15 billion in connection with releases and the purchase of securities that were the subject of statutory claims in the lawsuit FHFA v. Goldman Sachs & Co., et al., in the U.S. District Court of the Southern District of New York. Goldman Sachs will pay approximately $2.15 billion to Freddie Mac and approximately $1 billion to Fannie Mae. This settlement, worth approximately $1.2 billion, effectively makes Fannie Mae and Freddie Mac whole on their investments in the securities at issue. As part of the settlement, FHFA, Fannie Mae and Freddie Mac will release certain claims against Goldman Sachs & Co. related to the securities involved.
The settlement also resolves claims that involved a Goldman Sachs security in FHFA v. Ally Financial Inc., et al. FHFA previously settled claims against Ally Financial Inc.
This is the sixteenth settlement reached in the 18 PLS lawsuits FHFA filed in 2011. Three cases remain outstanding and FHFA is committed to satisfactory resolution of those actions.
FHFA v. Goldman Sachs & Co (main thrust excerpted below)
Between September 7, 2005 and October 29, 2007, Fannie Mae and Freddie Mac purchased from Goldman Sachs over $11.1 billion in residential mortgage-backed securities (the “GSE Certificates”) issued in connection with 40 securitizations for which Goldman served as sponsor, depositor, and/or lead underwriter.
These securities were sold pursuant to registration statements, including prospectuses and prospectus supplements that formed part of those registration statements, which contained materially false or misleading statements and omissions. Defendants falsely stated that the underlying mortgage loans and properties complied with certain underwriting guidelines and standards. These false statements and misleading omissions significantly overstated the ability of the borrowers to repay their mortgage loans and the value of the collateralized property.