WASHINGTON — Goldman Sachs entered into agreements Thursday with both the Federal Reserve Board and the New York Banking Department over alleged improprieties at its former mortgage servicing subsidiary.
The announcements came on the same day that Goldman finalized the sale of the subsidiary, Litton Loan Servicing, to Ocwen Loan Servicing. Goldman's agreement with New York regulators was a condition of their approval of the sale.
The New York agreement is binding on both Goldman and Ocwen, while the Fed's agreement applied only to Goldman.
In New York, Ocwen agreed to a series of changes in their servicing practices, including staffing and training requirements aimed at ending robo-signing. The mortgage servicer also agreed to withdraw pending foreclosure actions that include robo-signed affidavits. Ocwen pledged to provide a single point of contact to borrowers who are seeking a loan modification or in foreclosure.
Goldman, meanwhile, agreed to write down approximately $53 million in unpaid principal to help affected home owners in New York. If Goldman re-enters the mortgage servicing business, it agreed to implement the new servicing practices that now apply to Ocwen.
"Our agreement sets a new higher standard for the residential mortgage servicing industry, whose troubling foreclosure and servicing practices we have been investigating along with other regulators across the country," New York Banking Superintendent Benjamin Lawsky said in a press release.
"Goldman Sachs, Ocwen and Litton have now all agreed to put the rights of homeowners ahead of their profit margins by implementing these changes."
The Fed's enforcement action requires Goldman to hire an independent consultant to review certain foreclosure proceedings that were started by Litton. That review is intended to compensate home owners who suffered from wrongful foreclosures and other mistakes, and is meant to parallel similar reviews that the 14 largest mortgage servicers agreed to undertake in an April 2011 agreement with federal regulators.
The Fed stated in a press release that it plans to announce monetary penalties against Goldman, but it did not state when it will do so.
