Goldman, Morgan Stanley set $557 million Fed mortgage accord

Longer List

Goldman Sachs bought Litton in 2007 to get into mortgage servicing, and Morgan Stanley bought Saxon in 2006, before a housing market collapse that led to the worst financial crisis since the Great Depression. Litton started 135,586 foreclosures in 2009 and 2010, and Saxon initiated at least 60,313 actions in the same period, according to the Fed. Both banks later sold the servicers to Ocwen Financial Corp.

The settlement with Goldman Sachs and Morgan Stanley expands the industry payouts beyond the initial 14 firms that agreed in 2011 to hire outside consultants to review their foreclosures for errors.

HSBC Holdings Inc. and Ally Financial Inc. are also preparing to sign on to the deal, two people briefed on the matter have said. Neil Brazil, a U.S. spokesman for HSBC, said the bank is still in discussions with regulators. Its mortgage- servicing operations were regulated by both the Fed and OCC.

“The OCC continues conversations with the remaining servicers,” said Bryan Hubbard, an OCC spokesman.

IndyMac Bancorp’s successor OneWest Bank FSB and EverBank Financial Corp. also haven’t reached an accord with regulators.

Ally, with all its mortgage-servicing affiliates, represented the fifth-largest U.S. servicer with 2.5 million loans during the crisis, according to the Fed.

Residential Capital LLC, the unit of Detroit-based Ally involved in the settlement, supports the idea that bank funds “should go toward consumers rather than consultants,” and has been delayed in considering the settlement because of its bankruptcy, said Susan Fitzpatrick, a bank spokeswoman.

Bloomberg News

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus