November 30, 2020

DealBook: New York Fed Investigates Goldman Loan Division

The Federal Reserve Bank of New York has begun an investigation into the mortgage-servicing arm of Goldman Sachs, looking at whether it systematically rejected borrowers’ efforts to lower their loan payments through government programs.

The inquiry by the New York Fed arose from a letter sent by an anonymous employee, who accused the Goldman unit, Litton Loan, of denying loans without properly reviewing applications.

The letter was brought to the Fed’s attention by The Financial Times after it received the tip.

“We are in possession of the letter and are conducting an inquiry,” a spokesman for the New York Fed said in a statement.

A Goldman spokesman declined to comment.

According to The Financial Times, the anonymous whistle-blower said he had examined loans that qualified for government modifications but were consistently denied.

The accusation against Litton is the latest headache for the unit, which Goldman is seeking to sell.

Goldman disclosed in March that it was exploring a potential divestiture amid concerns that borrowers were being improperly evicted from their homes in foreclosures.

The controversy has led several firms, including Goldman, to disclose in regulatory filings that investigations into these allegations could lead to fines.

Goldman’s 2007 acquisition of Litton, meant to seize opportunities to buy up mortgage portfolios that could then be serviced, has not worked out as intended.

The investment bank remains a small player in the mortgage-servicing industry.

Last year, Litton was one of several firms that halted foreclosures because of criticism about how the industry processed the relevant paperwork.

Litton has since resumed foreclosure operations.

Article source: http://feeds.nytimes.com/click.phdo?i=0446825ce2d4298d2f3f59e61d83d670