Fed sanctions Goldman over Litton foreclosure issues
The Federal Reserve sanctioned Goldman Sachs (GS) Thursday, forcing the investment banking giant to conduct a review of foreclosures potentially mishandled by its former Litton Loan Servicing subsidiary. The review will take place in stride with recent consent orders the central bank and the Office of the Comptroller of the Currency issued against 14 major mortgage servicers in April. Last fall, the servicing industry came under investigation when evidence of forged foreclosure documents surfaced in courthouses around the country. Litton, which escaped the previous consent orders, is the 23rd largest mortgage servicer in the country. Goldman sold Litton to Ocwen Financial Corp (OCN) in a deal that closed in the second quarter. Goldman retained liability for possible foreclosure mishaps that occurred before the sale. Goldman is required to obtain a third-party review of foreclosure proceedings at Litton that were pending in 2009 or 2010. "The review is intended to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process," according to the Fed. Goldman, Litton and Ocwen also agreed on Thursday to write down $53 million in unpaid principal on loans serviced in New York. The agreement settles robo-signing and mishandled foreclosure claims with the New York superintendent of financial services. The Fed left open the possibility of monetary fines like the other consent orders. If Goldman chooses to re-enter the servicing space while the action is in effect, it must install the same requirements the other 14 servicers had to undergo. Write to Jon Prior. Follow him on Twitter @JonAPrior.