Goldman Sachs settled an SEC complaint for $550 million in 2010, but its last quarterly report — like those of other banks — describes a variety of pending lawsuits and government investigations that the firm faces. “There remains significant uncertainty surrounding the nature and extent of any exposure for participants in this market,” Goldman said in the report.
The passage of time since the housing crash first hit could affect the government’s ability to impose penalties on financial firms. Generally speaking, under a statute of limitations, the SEC can only obtain penalties for fraud within the past five years. But the SEC and other agencies could argue that the clock didn’t start ticking until it was apparent that fraud occurred.
Thursday’s settlement, which would require a judge’s consent, won approval from 49 states. Oklahoma was the lone holdout.
Under the terms of the deal, banks would have three years to complete principal writedowns, refinancings and other relief. It provides incentives for actions taken within the first 12 months so that the aid can get to homeowners sooner rather than later.
The settlement also includes about $17 billion that would go toward foreclosure-prevention measures, such as lowering the loan balance for borrowers who owe more than their homes are worth. Other provisions would provide for lowering interest rates for homeowners who are current on their loans. In addition, as many as 750,000 borrowers who lost their homes to foreclosure since 2008 would be eligible for payouts of about $2,000 each.
The five banks at the heart of the settlement are Wells Fargo, Bank of America, J.P. Morgan Chase, Ally Financial and Citigroup. Ultimately, the amount of aid to homeowners could reach $40 billion, officials said, adding that they hope other banks will soon sign similar agreements and adopt the new standards set out by the deal.
Consumer impact uncertain
Several Washington area housing counselors said the deal would probably do little to help their clients but that they needed to learn the details of the aid to be sure.
Cherelle Silue, manager of housing services at United Communities Against Poverty in Prince George’s County, said her first impression is that a homeowner could wind up not getting much.
For homeowners who are trying to catch up on their mortgages, “we are talking thousands and thousands of dollars,” Silue said. “I am sure that it is going to be able to help someone, but I am not sure how many.”
In any case, the celebrations among state and government officials over a significant settlement for homeowners on Thursday included numerous reminders that the victory marked a beginning rather than an ending.
“This settlement also protects our ability to further investigate the practices that caused this mess. And this is important,” Obama said at White House, adding: “We’re going to keep at it until we hold those who broke the law fully accountable.”
Staff writers David S. Hilzenrath, Sarah Kliff, Luz Lazo and Jeremy Borden contributed to this report.