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Friday, May 29, 2009
FINRA Withdraws Proposed Changes in Discovery Rules
A recent WallStreet Journal article reports that the Financial Industry Regulatory Authority (FINRA) has decided not to move forward with changes to its arbitration discovery rules. The proposed changes came under sharp criticism from Plaintiff's lawyers who believe the proposal would have put more too much additional burden on the brokerage firm clients. The news of FINRA's reversal has been well received by the Claimants' bar.
The text of the full article appears below:
It looks like the Financial Industry Regulatory Authority took to heart all the criticism about a proposal that would have obliged investors in arbitration to disclose more of their financial histories.
It quietly withdrew the plan.
Finra's decision may have been influenced by the times, in which many investors have lost a third or more of their portfolio values in the market drop and some have lost even more in frauds like Bernard L. Madoff's $50 billion Ponzi scheme.
Seth E. Lipner, an attorney and law professor at Baruch College in New York, says it's "a lousy time" to require that investors submit more information to justify arbitration claims against brokerages. "Wall Street was as inept at managing their own portfolios as they were in managing clients' money," he said.
Finra's proposal, filed with the SEC in March, would have changed the terms for lists of information that parties must exchange during arbitration. Document lists vary depending on the type of claim, but the proposal would have required, among other changes, that investors always submit five years of complete tax returns instead of three years of certain pages and schedules. It also would have required loan histories, among other papers.
The SEC received more than 50 comment letters about the proposal, including one from Lipner who likened the discovery process in securities arbitration to a "financial colonoscopy." That process, he says, also comes too late in a brokerage's relationship with an investor. "If they asked for this stuff when they made the recommendations, then it would already be in their files," he said in an interview Thursday.
Finra filed a two-page notice with the SEC, withdrawing the rule proposal, on May 21. The notice is buried among numerous 2008 filings posted on Finra's Web site.
Brendan Intindola, a Finra spokesman said that "a review of the comment letters submitted indicates that the consensus reached was not broad enough." Finra is working on a new proposal that is "informed by the comments submitted," he said.
Laurence S. Schultz, a securities arbitration attorney in Troy, Mich., says he applauds Finra's withdrawal, but is bothered the decision isn't more prominently featured on Finra's Web site given the substantial debate the proposal fueled. "They're not proud of it," he says.
Brokers didn't like some aspects of the proposal. The Securities Industry and Financial Markets Association, a trade group, described parts of it as "fundamentally unfair," criticizing a provision that required brokers to produce their entire trading history in cases about unauthorized and excessive trading, even with customers unrelated to the claim.
A Sifma spokesman said the industry broadly supports reforming the arbitration discovery process, but the proposal raised many issues, which it hopes can now be addressed outside of the rulemaking process.
Brian Smiley, president of the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors, says investor advocates perceived many provisions as being "overburdensome." But some are worth salvaging, such as a provision that would give certain investors more information about broker commissions. "I hope those will get into the new revision," he says.
Lawrence S. Polk, a securities attorney with Sutherland in Atlanta who represents brokerages, says the debate over documents will likely continue, regardless of the economic climate.
"We're constantly being asked to give more documents, yet claimants don't want to make that type of disclosure," he says. "It seems the discovery system is becoming unbalanced."
Our firm is currently assisting hundreds of clients in FINRA arbitration claims against their brokers. If you suspect you have lost money due to broker negligence or fraud, please contact us for a free case evaluation. Thank you.
The text of the full article appears below:
It looks like the Financial Industry Regulatory Authority took to heart all the criticism about a proposal that would have obliged investors in arbitration to disclose more of their financial histories.
It quietly withdrew the plan.
Finra's decision may have been influenced by the times, in which many investors have lost a third or more of their portfolio values in the market drop and some have lost even more in frauds like Bernard L. Madoff's $50 billion Ponzi scheme.
Seth E. Lipner, an attorney and law professor at Baruch College in New York, says it's "a lousy time" to require that investors submit more information to justify arbitration claims against brokerages. "Wall Street was as inept at managing their own portfolios as they were in managing clients' money," he said.
Finra's proposal, filed with the SEC in March, would have changed the terms for lists of information that parties must exchange during arbitration. Document lists vary depending on the type of claim, but the proposal would have required, among other changes, that investors always submit five years of complete tax returns instead of three years of certain pages and schedules. It also would have required loan histories, among other papers.
The SEC received more than 50 comment letters about the proposal, including one from Lipner who likened the discovery process in securities arbitration to a "financial colonoscopy." That process, he says, also comes too late in a brokerage's relationship with an investor. "If they asked for this stuff when they made the recommendations, then it would already be in their files," he said in an interview Thursday.
Finra filed a two-page notice with the SEC, withdrawing the rule proposal, on May 21. The notice is buried among numerous 2008 filings posted on Finra's Web site.
Brendan Intindola, a Finra spokesman said that "a review of the comment letters submitted indicates that the consensus reached was not broad enough." Finra is working on a new proposal that is "informed by the comments submitted," he said.
Laurence S. Schultz, a securities arbitration attorney in Troy, Mich., says he applauds Finra's withdrawal, but is bothered the decision isn't more prominently featured on Finra's Web site given the substantial debate the proposal fueled. "They're not proud of it," he says.
Brokers didn't like some aspects of the proposal. The Securities Industry and Financial Markets Association, a trade group, described parts of it as "fundamentally unfair," criticizing a provision that required brokers to produce their entire trading history in cases about unauthorized and excessive trading, even with customers unrelated to the claim.
A Sifma spokesman said the industry broadly supports reforming the arbitration discovery process, but the proposal raised many issues, which it hopes can now be addressed outside of the rulemaking process.
Brian Smiley, president of the Public Investors Arbitration Bar Association, or Piaba, a Norman, Okla.-based group of attorneys who represent investors, says investor advocates perceived many provisions as being "overburdensome." But some are worth salvaging, such as a provision that would give certain investors more information about broker commissions. "I hope those will get into the new revision," he says.
Lawrence S. Polk, a securities attorney with Sutherland in Atlanta who represents brokerages, says the debate over documents will likely continue, regardless of the economic climate.
"We're constantly being asked to give more documents, yet claimants don't want to make that type of disclosure," he says. "It seems the discovery system is becoming unbalanced."
Our firm is currently assisting hundreds of clients in FINRA arbitration claims against their brokers. If you suspect you have lost money due to broker negligence or fraud, please contact us for a free case evaluation. Thank you.
posted by
William B. Young Jr. Esq.
at
10:00 AM
Thursday, May 28, 2009
SEC Charges 10 Brokers with Fraud for Disguising Risks of Investing in Mortgage-Backed Securities
In a press release issued today, the Securities Exchange Commission (SEC) has filed charges against ten brokers that used to be associated with now defunct Brookstreet Securities Corp. The brokers include seven Florida residents. The brokers are accused of marketing and selling risky collateralized mortgage obligations (CMO's) to retirees as conservative investments suitable for their portfolios. The accused brokers allegedly made millions of dollars in commissions while the retiree's lost millions of dollars in their accounts.
The full text of the SEC press release appears below:
Washington, D.C., May 28, 2009 — The Securities and Exchange Commission today charged 10 brokers with fraud for falsely marketing investments in derivatives of mortgage-backed securities as safe and suitable for retirees and others with conservative investment goals. The SEC alleges that the brokers enriched themselves with millions of dollars in commissions and salaries while the investors suffered millions of dollars in losses.
According to the SEC’s complaint, filed in federal district court in West Palm Beach, Fla., the 10 brokers worked for Irvine, Calif.-based Brookstreet Securities Corp., which has since gone out of business. The SEC alleges that the brokers did not clearly define the risks to customers before investing their money in particularly risky Collateralized Mortgage Obligations (CMOs).
The SEC’s complaint charges Florida residents William Betta, Jr., James J. Caprio, Troy L. Gagliardi, Barry M. Kornfeld, Clifford A. Popper, Alfred B. Rubin, and Steven I. Shrago as well as Travis A. Branch of Kailua, Hawaii, Russell M. Kautz of Medford, Ore., and Shane A. McCann of Florence, Mont.
“These brokers disguised the risks of investing in these derivatives of mortgage-backed securities, exposing their customers to substantial losses as the subprime crisis emerged,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “They disregarded their customers’ needs and used deceptive and misleading tactics to enrich themselves at their clients’ expense.”
Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office, added, “These brokers took customers primarily interested in protecting their money and pushed them into risky derivative investments through blatant misrepresentations.”
According to the SEC’s complaint, the defendants portrayed particularly risky types of CMOs as secure investments to defraud more than 750 customers, ultimately costing them more than $36 million in losses. Meanwhile, the 10 brokers received $18 million in commissions and salaries related to their customers’ investments in CMOs.
The SEC alleges that contrary to the representations they made to their customers, the defendants invested in risky types of CMOs that were highly sensitive to changes in interest rates and jeopardized customers’ yield and principal. They were not all guaranteed by the U.S. government as the defendants told their customers, and they were not suitable for retirees or investors with conservative investment objectives.
The SEC further alleges that the defendants told customers that they only sparingly would use margin, which is the ability to borrow money to purchase CMOs. In fact, they heavily margined customers’ accounts, resulting in the more than $36 million in losses.
The SEC’s complaint alleges that the defendants violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
The Commission wishes to acknowledge the assistance of the Financial Industry Regulatory Authority, which today brought its own complaint alleging fraud and suitability violations against six additional former Brookstreet brokers.
The Commission’s investigation is ongoing.
If you believe you have been sold an investment involving mortgage-backed securities and have suffered losses, please contact our office for information on your options for recovery.
The full text of the SEC press release appears below:
Washington, D.C., May 28, 2009 — The Securities and Exchange Commission today charged 10 brokers with fraud for falsely marketing investments in derivatives of mortgage-backed securities as safe and suitable for retirees and others with conservative investment goals. The SEC alleges that the brokers enriched themselves with millions of dollars in commissions and salaries while the investors suffered millions of dollars in losses.
According to the SEC’s complaint, filed in federal district court in West Palm Beach, Fla., the 10 brokers worked for Irvine, Calif.-based Brookstreet Securities Corp., which has since gone out of business. The SEC alleges that the brokers did not clearly define the risks to customers before investing their money in particularly risky Collateralized Mortgage Obligations (CMOs).
The SEC’s complaint charges Florida residents William Betta, Jr., James J. Caprio, Troy L. Gagliardi, Barry M. Kornfeld, Clifford A. Popper, Alfred B. Rubin, and Steven I. Shrago as well as Travis A. Branch of Kailua, Hawaii, Russell M. Kautz of Medford, Ore., and Shane A. McCann of Florence, Mont.
“These brokers disguised the risks of investing in these derivatives of mortgage-backed securities, exposing their customers to substantial losses as the subprime crisis emerged,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “They disregarded their customers’ needs and used deceptive and misleading tactics to enrich themselves at their clients’ expense.”
Rosalind R. Tyson, Director of the SEC’s Los Angeles Regional Office, added, “These brokers took customers primarily interested in protecting their money and pushed them into risky derivative investments through blatant misrepresentations.”
According to the SEC’s complaint, the defendants portrayed particularly risky types of CMOs as secure investments to defraud more than 750 customers, ultimately costing them more than $36 million in losses. Meanwhile, the 10 brokers received $18 million in commissions and salaries related to their customers’ investments in CMOs.
The SEC alleges that contrary to the representations they made to their customers, the defendants invested in risky types of CMOs that were highly sensitive to changes in interest rates and jeopardized customers’ yield and principal. They were not all guaranteed by the U.S. government as the defendants told their customers, and they were not suitable for retirees or investors with conservative investment objectives.
The SEC further alleges that the defendants told customers that they only sparingly would use margin, which is the ability to borrow money to purchase CMOs. In fact, they heavily margined customers’ accounts, resulting in the more than $36 million in losses.
The SEC’s complaint alleges that the defendants violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The Commission seeks permanent injunctive relief, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties.
The Commission wishes to acknowledge the assistance of the Financial Industry Regulatory Authority, which today brought its own complaint alleging fraud and suitability violations against six additional former Brookstreet brokers.
The Commission’s investigation is ongoing.
If you believe you have been sold an investment involving mortgage-backed securities and have suffered losses, please contact our office for information on your options for recovery.
posted by
William B. Young Jr. Esq.
at
1:26 PM
Wednesday, May 20, 2009
Regions Bank May Have to Merge to Raise Required Capital
According to a May 20, 2009 Bizjournals.com article Regions bank has been ordered to raise $2.5 billion dollars after failing the stress test given to 19 of the country's largest banks.
Although Regions may have other options, such as issuing additional shares or converting debt, perhaps the most appealing (and most likely) scenario has the bank finding a merger partner. This option is not new to the financial services, particularly in the wake of the subprime mortgage meltdown and corresponding credit crisis that has bankrupted numerous financial institutions and forced mergers among heretofore unlikely bedfellows (see Merrill Lynch/Bank of America, Bear Sterns/JP Morgan, Wachovia/Wells Fargo and Salomon Smith Barney/Morgan Stanley).
Excerpts from the article can be found below:
While Regions Financial Corp. announced plans to come up with half of the $2.5 billion required by the U.S. government through a stock offering, banking experts believe the Birmingham company could eyeball a merger as a part of its capital plan.
North Carolina’s BB&T Corp. and JPMorgan & Chase & Co., which will likely be hungry for acquisitions once the financial markets turn around, are two potential bidders that are considering Regions to expand their franchises in the Southeast, according to Fox-Pitt Kelton Cochran Caronia Waller analysts.
“While Regions has options to get the capital it needs, we do not think a merger with another institution can be completely ruled out,” the company said in a client note released this week. “If it came down to Regions deciding whether or not to have the government as a partner or merging with another company – we believe a merger would maximize shareholder value.”
Regions – which was ordered to raise $2.5 billion after failing the government’s “stress test” – announced plans Wednesday to raise half of the funds by selling $1 billion shares in a common stock offering and another $250 million worth of new convertible preferred shares.
Since the bank’s shares are trading just above $5 per share, raising the total amount would have been a much harder task, especially since the shares will have to be deeply discounted to lure investors, said Howe Barnes Hoefer & Arnett banking analyst Jeff Davis.
“When it was a $25 stock, the answer would be no (it wouldn’t be difficult) – but to raise $2 billion at $5 – that’s going to be tough for Regions,” he said. “This is not about what’s best for shareholders. This is more about survival and meeting the capital call the government has required.”
Regions spokesman Tim Deighton stressed that the company would raise the money without converting Uncle Sam’s preferred shares into common stock. He also said the bank’s brokerage arm, Morgan Keegan & Co. and its retail-branch network are not up for sale.
However, if options become limited, the bank would not have a choice but to sell some of its most valuable assets, Davis said.
“If they can’t make the $2.5 billion capital call – then Morgan Keegan might have to be on the table,” he said.
However, if the bank’s earnings improve within the next few quarters, the federal government might ease up and allow the bank to raise a lower amount, Davis said.
The stress test, officially known as the Supervisory Capital Assessment Program, analyzed fourth quarter data at the nation’s top 19 banks to test their ability to withstand economic pressures amid skyrocketing unemployment rates and loan defaults. Based on the government’s worst-case scenario, Regions could encounter $9.2 billion in loan losses next year.
Region's brokerage unit Morgan Keegan has been embroiled in customer lawsuits over the marketing and sale of its proprietary RMK Bond and Income Funds. Approximately 40 arbitration claims have been heard and ruled on by FINRA arbitration panels in the past four months. The Claimants in those suits have won the majority of the claims and over 80% of the past dozen or so decided.
Please contact the law offices of Colling Gilbert Wright & Carter for additional information on Regions Bank and Morgan Keegan. Thank you.
Although Regions may have other options, such as issuing additional shares or converting debt, perhaps the most appealing (and most likely) scenario has the bank finding a merger partner. This option is not new to the financial services, particularly in the wake of the subprime mortgage meltdown and corresponding credit crisis that has bankrupted numerous financial institutions and forced mergers among heretofore unlikely bedfellows (see Merrill Lynch/Bank of America, Bear Sterns/JP Morgan, Wachovia/Wells Fargo and Salomon Smith Barney/Morgan Stanley).
Excerpts from the article can be found below:
While Regions Financial Corp. announced plans to come up with half of the $2.5 billion required by the U.S. government through a stock offering, banking experts believe the Birmingham company could eyeball a merger as a part of its capital plan.
North Carolina’s BB&T Corp. and JPMorgan & Chase & Co., which will likely be hungry for acquisitions once the financial markets turn around, are two potential bidders that are considering Regions to expand their franchises in the Southeast, according to Fox-Pitt Kelton Cochran Caronia Waller analysts.
“While Regions has options to get the capital it needs, we do not think a merger with another institution can be completely ruled out,” the company said in a client note released this week. “If it came down to Regions deciding whether or not to have the government as a partner or merging with another company – we believe a merger would maximize shareholder value.”
Regions – which was ordered to raise $2.5 billion after failing the government’s “stress test” – announced plans Wednesday to raise half of the funds by selling $1 billion shares in a common stock offering and another $250 million worth of new convertible preferred shares.
Since the bank’s shares are trading just above $5 per share, raising the total amount would have been a much harder task, especially since the shares will have to be deeply discounted to lure investors, said Howe Barnes Hoefer & Arnett banking analyst Jeff Davis.
“When it was a $25 stock, the answer would be no (it wouldn’t be difficult) – but to raise $2 billion at $5 – that’s going to be tough for Regions,” he said. “This is not about what’s best for shareholders. This is more about survival and meeting the capital call the government has required.”
Regions spokesman Tim Deighton stressed that the company would raise the money without converting Uncle Sam’s preferred shares into common stock. He also said the bank’s brokerage arm, Morgan Keegan & Co. and its retail-branch network are not up for sale.
However, if options become limited, the bank would not have a choice but to sell some of its most valuable assets, Davis said.
“If they can’t make the $2.5 billion capital call – then Morgan Keegan might have to be on the table,” he said.
However, if the bank’s earnings improve within the next few quarters, the federal government might ease up and allow the bank to raise a lower amount, Davis said.
The stress test, officially known as the Supervisory Capital Assessment Program, analyzed fourth quarter data at the nation’s top 19 banks to test their ability to withstand economic pressures amid skyrocketing unemployment rates and loan defaults. Based on the government’s worst-case scenario, Regions could encounter $9.2 billion in loan losses next year.
Region's brokerage unit Morgan Keegan has been embroiled in customer lawsuits over the marketing and sale of its proprietary RMK Bond and Income Funds. Approximately 40 arbitration claims have been heard and ruled on by FINRA arbitration panels in the past four months. The Claimants in those suits have won the majority of the claims and over 80% of the past dozen or so decided.
Please contact the law offices of Colling Gilbert Wright & Carter for additional information on Regions Bank and Morgan Keegan. Thank you.
posted by
William B. Young Jr. Esq.
at
12:16 PM
Tuesday, May 12, 2009
Regions Financial May Face Federal Charges over Sale of Auction Rate Securities
According to a May 11, 2009 Reuters report, Regions Financial Corp., parent company of Morgan Keegan, may face charges for Morgan Keegan's role in the improper sale of auction rate securities (ARS).
Morgan Keegan is already facing hundreds of FINRA arbitration claims over the marketing and sale of its Regions Morgan Keegan Bond and Income Funds.
An excerpt from the Reuters article appears below:
Mon May 11, 2009 12:34pm EDT
NEW YORK, May 11 (Reuters) - The U.S. Securities and Exchange Commission may launch a civil proceeding against the Morgan Keegan & Co brokerage unit of Regions Financial Corp over the alleged improper sale of auction-rate securities, Regions said on Monday.
In its quarterly report filed with the SEC, Regions said the regulator filed a "Wells Notice" in March against Morgan Keegan. Such a notice indicates that civil action is possible, and gives the recipient a chance to mount a defense.
Regions said the SEC is investigating the adequacy of Morgan Keegan's disclosures of liquidity risks associated with auction-rate debt, and whether it sold a large volume of the debt after its ability to support the auctions was diminished. It said Morgan Keegan has cooperated with the SEC, and is buying back auction-rate debt it sold to retail customers.
Rates on auction-rate debt reset in periodic auctions. Regulators say brokerages misled investors into believing the debt was safe and the equivalent of cash. After the $330 billion market seized up in February 2008, many investors could not sell the debt or could sell it only at a loss.
Our firm is currently investigating and filing arbitration claims on behalf of investors seeking damages related to the Morgan Keegan bond funds and auction rate securities.
Morgan Keegan is already facing hundreds of FINRA arbitration claims over the marketing and sale of its Regions Morgan Keegan Bond and Income Funds.
An excerpt from the Reuters article appears below:
Mon May 11, 2009 12:34pm EDT
NEW YORK, May 11 (Reuters) - The U.S. Securities and Exchange Commission may launch a civil proceeding against the Morgan Keegan & Co brokerage unit of Regions Financial Corp over the alleged improper sale of auction-rate securities, Regions said on Monday.
In its quarterly report filed with the SEC, Regions said the regulator filed a "Wells Notice" in March against Morgan Keegan. Such a notice indicates that civil action is possible, and gives the recipient a chance to mount a defense.
Regions said the SEC is investigating the adequacy of Morgan Keegan's disclosures of liquidity risks associated with auction-rate debt, and whether it sold a large volume of the debt after its ability to support the auctions was diminished. It said Morgan Keegan has cooperated with the SEC, and is buying back auction-rate debt it sold to retail customers.
Rates on auction-rate debt reset in periodic auctions. Regulators say brokerages misled investors into believing the debt was safe and the equivalent of cash. After the $330 billion market seized up in February 2008, many investors could not sell the debt or could sell it only at a loss.
Our firm is currently investigating and filing arbitration claims on behalf of investors seeking damages related to the Morgan Keegan bond funds and auction rate securities.
Labels: broker misconduct
posted by
William B. Young Jr. Esq.
at
6:35 AM
Goldman Sachs Settles with State Regulator over Subprime Mortgages
A May 11, 2009 Investment News article reports Massachusetts Attorney General Martha Coakley yesterday announced a $60 million settlement with The Goldman Sachs Group Inc. as part of a continuing investigation into investment banks' role in securitizing subprime-mortgage loans. Her office had already been investigating foreclosure schemes and predatory lending.
In this industrywide investigation, courts in Massachusetts have determined that "not only were the loans themselves unfair but they were destined to fail at their inception," Ms. Coakley said at a press conference.
Of the $60 million settlement, $50 million will go toward helping some 714 Massachusetts homeowners whose mortgages are either still performing or who are significantly delinquent - but not those who have already lost their homes to foreclosure.
As part of the settlement, New York-based Goldman will agree to principal write-downs of 25% to 30% for first mortgages and upward of 50% for those with a second mortgage, if the individuals want to refinance or sell their homes.
Those who are significantly delinquent will be required to make manageable payments toward their mortgages until they can refinance or sell their homes.
Finally, if a homeowner is unable to sell, Goldman has agreed to assist qualified borrowers with refinancing options and other alternatives to foreclosure, Ms. Coakley said.
Homeowners holding loans with Goldman entities will also get immediate assistance as will the thousands who are being serviced by Litton Loan Servicing LP, Goldman's Houston-based servicer of subprime mortgages, she added.
The homeowners who modify their terms won't be subject to litigation.
Goldman itself isn't an originator of the loans, but it was a player in the securitization process.
The remaining $10 million of the total settlement will go toward the Commonwealth of Massachusetts.
Ms. Coakley stressed that this settlement isn't part of a court procedure and that Goldman didn't admit that it was culpable - nor did the office ask it to admit wrongdoing.
Rather, Goldman and the attorney general's office agreed on a "best efforts"
proposal, which doesn't have specific mandates for the bank but ensures cooperation with the office, she said.
Ms. Coakley noted that her office believes that Goldman that the bank would uphold its end of the agreement and cooperate.
Michael DuValley, a spokesman for Goldman, said that the firm is pleased to have resolved the matter.
If you believe you have lost money due to investments involving subprime mortgage pools, please contact our office for a free case evaluation.
In this industrywide investigation, courts in Massachusetts have determined that "not only were the loans themselves unfair but they were destined to fail at their inception," Ms. Coakley said at a press conference.
Of the $60 million settlement, $50 million will go toward helping some 714 Massachusetts homeowners whose mortgages are either still performing or who are significantly delinquent - but not those who have already lost their homes to foreclosure.
As part of the settlement, New York-based Goldman will agree to principal write-downs of 25% to 30% for first mortgages and upward of 50% for those with a second mortgage, if the individuals want to refinance or sell their homes.
Those who are significantly delinquent will be required to make manageable payments toward their mortgages until they can refinance or sell their homes.
Finally, if a homeowner is unable to sell, Goldman has agreed to assist qualified borrowers with refinancing options and other alternatives to foreclosure, Ms. Coakley said.
Homeowners holding loans with Goldman entities will also get immediate assistance as will the thousands who are being serviced by Litton Loan Servicing LP, Goldman's Houston-based servicer of subprime mortgages, she added.
The homeowners who modify their terms won't be subject to litigation.
Goldman itself isn't an originator of the loans, but it was a player in the securitization process.
The remaining $10 million of the total settlement will go toward the Commonwealth of Massachusetts.
Ms. Coakley stressed that this settlement isn't part of a court procedure and that Goldman didn't admit that it was culpable - nor did the office ask it to admit wrongdoing.
Rather, Goldman and the attorney general's office agreed on a "best efforts"
proposal, which doesn't have specific mandates for the bank but ensures cooperation with the office, she said.
Ms. Coakley noted that her office believes that Goldman that the bank would uphold its end of the agreement and cooperate.
Michael DuValley, a spokesman for Goldman, said that the firm is pleased to have resolved the matter.
If you believe you have lost money due to investments involving subprime mortgage pools, please contact our office for a free case evaluation.
posted by
William B. Young Jr. Esq.
at
6:19 AM
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