Goldman Sachs will pay $3.15 billion to repurchase poorly underwritten mortgage-backed securities that it sold to Fannie Mae and Freddie Mac in the run-up to the Great Recession, the Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, announced today.
Goldman Sachs will pay about $2.15 billion to Freddie Mac and approximately $1 billion to Fannie Mae to make whole on the securities at issue. The settlement has a net worth of approximately $1.2 billion, the FHFA says in a release.
As part of the agreement, Fannie Mae and Freddie Mac will release certain claims against Goldman Sachs related to the securities involved.
The settlement also resolves claims that involved a Goldman Sachs security in FHFA v. Ally Financial Inc., et al. The FHFA previously settled claims against Ally Financial Inc.Â
This is the 16th settlement reached in the 18 lawsuits that the FHFA filed against mortgage lenders in 2011.
Goldman Sachs says in a statement that the cost of the settlement is ‘substantially covered’ by its reserves.
After repurchasing the securities, Goldman Sachs could sell them for a higher price, which would, in turn, reduce the cost of the settlement.