Goldman Sachs Group Inc. agreed to pay about $60 million to settle a Massachusetts investigation into the packaging of mortgage securities at the root of the collapse of the U.S. housing market.
The agreement calls for the bank to pay about $50 million to compensate homeowners and the rest to the state, Massachusetts Atty. Gen. Martha Coakley said Monday. The deal will also allow for some loan principal reductions. Goldman Sachs directly holds 714 Massachusetts mortgages, she said.
The bundling of the riskiest type of mortgages into securities turned the U.S. housing slump into a global recession as foreclosures deflated bond values and toppled Wall Street firms such as Lehman Bros. Holdings Inc.
"There's no dispute that Goldman Sachs and other securitizers have been involved intricately in this whole process by which loans were made to homeowners and as we have argued, in many instances, [were] destined to fail," Coakley said.
"Goldman Sachs is pleased to have resolved this matter," said Michael DuVally, a spokesman for the firm in New York. He declined to comment further.
Goldman Sachs said in a January regulatory filing that it had received requests for information from various government agencies on its securitization of subprime mortgages.