By Justin Baer And Joe Light
Goldman Sachs Group Inc. is nearing a deal to pay a U.S. housing
regulator more than $1 billion to settle claims the Wall Street
firm failed to disclose risks on the mortgage bonds it sold ahead
of the financial crisis, people familiar with the matter said.
A settlement with the Federal Housing Finance Agency, which
oversees Fannie Mae and Freddie Mac, could be announced as early as
Friday, the people said.
Fannie and Freddie don't make loans but buy them from lenders
and package them into securities, providing guarantees to make
investors whole if the loans default. However, during the housing
boom, the companies also invested in securities that were privately
issued by Goldman and other banks.
The settlement would come on the heels of Bank of America
reaching a separate mortgage pact with the Justice Department and
other government offices that added up to $16.65 billion.
The FHFA sued 18 firms in 2011 alleging they misrepresented the
quality and riskiness of the loans underlying the securities they
sold to Fannie and Freddie. By July, the regulator had settled with
all but four of the firms. FHFA's settlements on the matter have
extracted more than $15 billion from many of Goldman's
competitors.
In turn, many banks had argued that Fannie and Freddie knew what
they were getting into. Including Goldman's settlement, the
government will have recovered more than $17 billion from 17
firms.
If a settlement doesn't materialize, FHFA's lawsuit against
Goldman is slated to go to trial in late September.
Write to Justin Baer at justin.baer@wsj.com and Joe Light at
joe.light@wsj.com
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