Goldman Sachs close to settling for $1.1bn over mortgage securities

Goldman Sachs is close to paying about $1.1 billion (€830 million) to resolve claims from a US government agency that it sold bad mortgage-backed securities as the investment bank prepares for related negotiations with the department of justice.

Negotiations between Goldman and the Federal Housing Finance Agency (FHFA), which has wrung almost $20 billion in settlements out of other banks, could be concluded as soon as next week, according to people familiar with the matter.

Goldman would pay about $1.1 billion, double its 2010 landmark settlement with the Securities and Exchange Commission, which at the time was considered a big penalty for behaviour related to the financial crisis.

That deal has since been dwarfed by multibillion-dollar settlements between the US government and JPMorgan Chase, Citigroup and, this week, Bank of America.

Goldman and Morgan Stanley are also in preliminary discussions with the department over allegations they mis-sold mortgage-backed securities, according to three sources.

After the crisis, Goldman was an early target for regulators, prosecutors and politicians but it subsequently enjoyed a quieter time as the spotlight shifted to JPMorgan and BofA – the biggest issuers of MBS.

The bank is one of only four institutions still being pursued by the FHFA, which sued 18 institutions in 2011, accusing them of misrepresenting the quality of securities sold to Fannie Mae and Freddie Mac. The other holdouts are Nomura, HSBC and Royal Bank of Scotland. – Copyright The Financial Times Limited 2014