Goldman to Buy Back $3.15B in RMBS to Resolve FHFA Claims

Goldman Sachs Group Inc. (GS) will pay $3.15 billion to buy back residential mortgage-backed securities related to bonds that were sold to Freddie Mac and Fannie Mae. The repurchase represents an approximately $1. 2billion premium and makes the mortgage companies whole on the securities. The RMBS case was brought by the Federal Housing Finance Agency.

It was in 2011 that FHFA sued 18 firms to get back taxpayer money from when the U.S. took control of Freddie and Fannie after the economy tanked in 2008. Goldman is the fifteenth bank to settle.

The firm will pay Fannie May $1 billion and $2.15 billion to Freddie Mac for the securities. The two had purchased $11.1 billion from Goldman Sachs. A few of the other banks that have settled with the FHFA include Morgan Stanley (MS), JPMorgan Chase (JPM), and Bank of America Corp. (BAC). The agency’s remaining RMBS fraud cases still pending are those against RBS Securities Inc. (RBS), HSBC North America Holdings Inc., (HSBC), and Nomura Holding America Inc. (NMR).

In June, Goldman and a couple of the now remaining defendants asked U.S. District Judge Denise Cote to reconsider her earlier ruling that FHFA did not wait too long to sue the banks over the RMBS. They’ve wanted the cases against them dismissed.

Their latest attempt to have the claims tossed out was a result of a recent U.S. Supreme Court ruling. In that decision, the court determined that a federal law did not preempt a state-law statute that put time restrictions on filing an applicable complaint even if a plaintiff was unaware it had a claim. Earlier this month FHFA pointed to a ruling by an appeals court that let the National Credit Union Administration push securities cases against banks even though there were potential issues regarding time limits.

Goldman Sachs Settles FHFA Lawsuit for About $1.2 Billion, The Wall Street Journal, August 22, 2014

Goldman to Buy $3.15 Billion of Debt to End FHFA Claims, Bloomberg, August 22, 2014

More Blog Posts:
Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B, Institutional Investor Securities Blog, March 29, 2014

Massachusetts Files Lawsuit Against Fannie Mae, Freddie Mac, and FHFA, Stockbroker Fraud Blog, June 2, 2014

JPMorgan Will Pay $614M to US Government Over Mortgage Fraud Lawsuit, Stockbroker Fraud Blog, February 8, 2014