Goldman Sachs to pay $5 billion in mortgage settlement

The settlement comprises a $US2.385 billion civil penalty, an $875 million cash payment and $1.8 billion in relief for homeowners with overvalued mortgages as well as distressed borrowers, Reuters reported.

The settlement was reached in principle between Goldman and a task force that includes the U.S. Department of Justice, the NY and Illinois Attorneys General, the national Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle.

Goldman Sachs has warned the deal will reduce its fourth-quarter earnings by $1.5bn.

Goldman Sachs Asset Management, L.P. (NASDAQ:GSBD) is an investment adviser of the Company, which provides it with investment advisory and management services and certain administrative services.

The investigation was related to the bank’s securitisation, underwriting and sale of residential mortgage-backed securities from 2005 to 2007.

Goldman Sachs is still spending big money to clean up shady deals that fueled the financial crisis.

Goldman Sachs BDC (NASDAQ:GSBD) last announced its earnings results on Thursday, November 5th.

The agreement in principle is subject to the negotiation of definitive documentation, and there can be no assurance that the firm, the U.S. Department of Justice and the other applicable governmental authorities will agree on the definitive documentation. Bank of America, JPMorgan Chase and others all reached larger, more substantial settlements in 2014 and 2015. Chairman and CEO Lloyd Blankfein said in a prepared statement. Goldman shares fell 9 cents to $161.30 in aftermarket trading.

Adding a bit of insult to injury, the US Securities and Exchange Commission announced today that Goldman will pay a million fine over its short selling practices.

And in 2013 a former Goldman trader, Fabrice Tourre, was convicted on charges of misleading investors on mortgage-linked securities that turned out to be high-risk.