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Goldman Sachs Earns $100 million Credit Toward $1.8 billion Consumer Relief Obligation

An independent monitor reported Wednesday Goldman Sachs has earned conditional approval of more than $100 million worth of credit towards meeting its $1.8 billion consumer relief obligation.

The obligation stems from its April 11, 2016 mortgage-related settlement agreements between the U.S. Department of Justice and three states.

Eric D. Green, a professional mediator and retired Boston University law professor, was named by the settling parties as independent monitor with responsibility for determining whether Goldman Sachs fulfills its consumer-relief obligations.

Green’s report details the consumer-relief activity Goldman Sachs conducted since his initial report on September 16, 2016.

The consumer-relief activity included the forgiveness of balances due on 132 second-lien mortgages, for total principal forgiveness of $7,758,855 and average forgiveness of $58,779 on individual loans. Total credit claimed and conditionally approved for those loan modifications was $3,655,290. Under the formulas set out in the settlements, certain kinds of consumer relief earn less credit than the actual dollar amount of loan forgiveness, for example, while other kinds of relief earn more.

The extinguished second-lien loans were spread across four states, with about 55 percent located in the settling states of Illinois and New York. 56 percent of the credit is for forgiveness of loans located in census tracts identified by HUD as “Hardest Hit Areas,” which contain large concentrations of distressed properties and foreclosure activities.

Another category of consumer-relief activity included in the report was the forgiveness of unsecured debt and other debt more junior than second liens in connection with 4,988 loans. The total principal forgiveness on those loans was $240,252,022, with average principal forgiveness of $48,166 per loan, and total credit of $107,924,047. Those loans were located in 34 states and the District of Columbia, with more than 16 percent of the associated credit in Illinois and New York and 56 percent in Hardest Hit Areas.

Total credit sought by Goldman Sachs and conditionally approved by Green during the period was $111,579,337.

"Goldman Sachs is off to a good start," Green said.

The April 11, 2016, agreements settled potential and filed legal claims against Goldman Sachs regarding the marketing, structuring, arrangement, underwriting, issuance and sale of mortgage-based securities. Besides Goldman Sachs and the Department of Justice, the settling parties were California, Illinois, New York, the National Credit Union Administration Board and the Federal Home Loan Banks of Chicago and Des Moines. Goldman Sachs agreed to provide a total of $5.06 billion under the agreements, including consumer relief valued at $1.8 billion, to be distributed by the end of January 2021.

Including credit for a small "test sample" of 100 loan modifications considered in the Monitor's initial report, Goldman Sachs to date has received conditional approval for $113,698,926 worth of credit.

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