NYS, Fed act against Goldman on mortgages

Goldman Sachs' mortgage subsidiary agreed Thursday to stop many of its controversial mortgage-related practices in a settlement with New York State's Department of Financial Services and Banking Department. The regulator said the settlement was a condition to Goldman Sachs Group Inc.'s sale of its Litton Loan Servicing subsidiary to mortgage company Ocwen Financial Corp.

Also Thursday the country's chief federal banking regulator, the Federal Reserve Board, announced a formal enforcement action against Goldman to address a pattern of misconduct and negligence in how it handled mortgage loans and foreclosures via Litton. The Fed ordered Goldman to retain an independent consultant to review foreclosures initiated by Litton pending in 2009 and 2010.

The Fed said 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. The Fed said it also plans to announce monetary penalties.

As part of the New York deal, the Goldman subsidiary said it will stop the practice of robo-signing mortgage paperwork. Last fall it was revealed the largest banks had outsourced paperwork to companies that hired unqualified people to sign affidavits without reviewing documents, which is illegal.