Goldman Close to Settling FHFA Lawsuit for Over $1 Billion -- Update

By Justin Baer And Joe Light 

Goldman Sachs Group Inc. is nearing a deal to pay a U.S. housing regulator more than $1 billion to settle claims the Wall Street firm failed to disclose risks on the mortgage bonds it sold ahead of the financial crisis, people familiar with the matter said.

A settlement with the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, could be announced as early as Friday, the people said.

Fannie and Freddie don't make loans but buy them from lenders and package them into securities, providing guarantees to make investors whole if the loans default. However, during the housing boom, the companies also invested in securities that were privately issued by Goldman and other banks.

The settlement would come on the heels of Bank of America reaching a separate mortgage pact with the Justice Department and other government offices that added up to $16.65 billion.

The FHFA sued 18 firms in 2011 alleging they misrepresented the quality and riskiness of the loans underlying the securities they sold to Fannie and Freddie. By July, the regulator had settled with all but four of the firms. FHFA's settlements on the matter have extracted more than $15 billion from many of Goldman's competitors.

In turn, many banks had argued that Fannie and Freddie knew what they were getting into. Including Goldman's settlement, the government will have recovered more than $17 billion from 17 firms.

If a settlement doesn't materialize, FHFA's lawsuit against Goldman is slated to go to trial in late September.

Write to Justin Baer at [e-mail] and Joe Light at [e-mail]

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