Goldman Sachs (GS) is paying the commonwealth of Massachusetts $10m as a result of an agreement between the firm and the state's Attorney General regarding subprime loan activity and related securitization activity. Goldman is also pledging an addition $50m for loan refinancing to make the subprime mortgages more affordable to the borrowers. No money is set aside, as of yet, for any third-party investors who may feel the ouch from today's decision. Under the settlement, Goldman is agreeing to significant principal write-down. Goldman will reduce the principal of first mortgages by up to 25 to 35% and second mortgages by 50% or more as part of the deal. The move allows subprime borrowers to stay in their homes as long as they can still afford some kind of substantial monthly payment. Further for borrowers who can't make such a payment for six months Goldman will reduce the principal owed on the existing loan to assist the borrower. Loans serviced by Litton Loan Servicing, Goldman's affiliate, will spearhead this assistance. However, by cooperating with the state prosecutor, Goldman is making an admission of guilt, according to Attorney General Martha Coakley. "We are pleased that Goldman cooperated during this investigation and that it has committed to working with our office to help Massachusetts borrowers who are struggling with unsustainable subprime loans," she said. "We will continue to investigate the deceptive marketing of unfair loans and the companies that facilitated the sale of those loans to consumers in the Commonwealth." Goldman Sachs is not commenting. The investigation is likely to continue, as today's announcement does not address a few points the AG set out to investigate when it launched its inquiry into Goldman in December 2007. In that referendum, the AG set out to examine if Goldman also failed to correct inaccurate information in securitization trustee reports concerning repurchases of loans. The Attorney General is also investigating if Goldman failed to make available to potential investors certain information concerning allegedly unfair or problem loans, including information obtained during loan diligence and the pre-securitization process, as well as information concerning their practices in making repurchase claims relating to loans both in and out of securitizations. Write to Jacob Gaffney.