In the wake of the Justice Department’s record-breaking settlement with Bank of America requiring the mammoth institution to pay a settlement of approximately $17 billion for fraud related to mortgage practices, now investment banking firm Goldman Sachs is entering in to a civil settlement as well. It agreed to pay $3.15 billion to resolve claims that it misled U.S. mortgage giants Fannie Mae and Freddie Mac about risky mortgage securities it sold them before the housing market collapsed in 2007.
In large part, the financial crisis resulted from the packaging and selling of mortgage-backed securities which cobbled together partial interests in mortgage transactions – many of them of the subprime variety. When the value of the assets – the real estate – serving as collateral for these mortgages collapsed, the value of these securities also declined. The chain reaction generated a series of responses causing companies such as Fannie Mae and Freddie Mac to lose substantial value in its investments. In the years since the crisis, they each have sued 16 different institutions which sold them these risky securities seeking to recoup about $196 billion in losses stemming from the alleged fraudulent misrepresentations. In this settlement, Goldman Sachs, the investment bank, is actually buying back $3.15 billion in securities it had bought from Fannie and Freddie. The net worth to Fannie and Freddie of these sales will amount only to $ 1.2 billion because of the difference between what Goldman will pay and the current diminished value of the securities.
The outsized losses to the two mortgage giants mirror the losses which individual homeowners suffered in the wake of the crisis. When the housing bubble burst, thousands of homeowners – many in New Mexico – realized that the value of their homes had plummeted while their obligations to their lenders – or their lenders’ successors-in-interest – remained constant. Along with concurrent massive job losses among many of these homeowners, this hemorrhaging of equity in their homes triggered numerous real estate foreclosures in New Mexico and nationwide.
At the Law Office of George “Dave” Giddens, P.C. we offer expert, dependable advice on handling real estate transactions as well as real estate foreclosures for distressed homeowners as well as commercial lenders.. Our attorneys serve Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Our conveniently located office has ample free parking and is easily accessible by public transportation. We offer flexible office hours upon request. To make an appointment for a consultation about your real estate matter, contact us online by visiting the firm’s website at giddenslaw.com. or call us at (505) 633-6298. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.