NEW YORK (CBSNewYork/AP) — The Justice Department on Monday announced a $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities leading up to the 2008 financial crisis.
The deal resolves state and federal probes into the sale of shoddy mortgages before the housing bubble and subsequent economic meltdown.READ MORE: Trump Says His 'Journey' Is 'Far From Being Over' In First Major Public Speech Since Leaving Office
It requires the bank to pay a $2.4 billion civil penalty and an additional $1.8 billion in relief to underwater homeowners and distressed borrowers, along with $875 million in other claims.
“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” Acting Associate Attorney General Stuart Delery said in a statement.
New York State will receive $670 million from the settlement, WCBS 880’s Stephanie Colombini reported. Attorney General Eric Schneiderman said $190 million of that will go to the state budget and $480 million will go towards consumer relief.
“This settlement will help thousands of families with principle forgiveness to obtain write-downs of their mortgage debt so they avoid foreclosure and stay in their homes, it will help to finance multi-family affordable housing projects,” Schneiderman said.
The total amount New York has received from deals with the five big banks is now more than $5.3 billion.READ MORE: Gov. Cuomo Agrees To Attorney General James' Demand For Legal Referral To Investigate Sexual Harassment Allegations
The agreement is the latest multi-billion-dollar civil settlement reached with a major bank over the economic meltdown in which millions of Americans lost their homes to foreclosure. Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co.
But the deal, which includes no criminal sanctions or penalties, is likely to stir additional criticism about the department’s inability to hold bank executives personally responsible for the financial crisis. Attempting to address those concerns, Deputy Attorney General Sally Quillian Yates issued department-wide guidance last year aimed at encouraging more criminal prosecutions of individuals for white-collar wrongdoing.
Goldman previously disclosed the settlement in January, but federal officials laid out additional allegations in a statement of facts as they accused the bank of making serious misrepresentations about the quality of mortgage-backed securities it issued. The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans.
The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007.
The bank, for instance, admitted that it did not share with investors troubling information that it had received about the business practices of some loan originators, and that it falsely told investors that the loans had been checked to ensure that they met quality standards.MORE NEWS: FDNY: 3 Injured In Manhole Fire In Midtown; Con Ed Crews Remain On Scene
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