Goldman Sachs has agreed to pay nearly $10 million to the state and to modify more than 700 subprime loans as part of a settlement with Attorney General Martha Coakley’s office.
The settlement follows a probe into how major Wall Street players were involved in writing loans to borrowers with poor credit, and then underwriting securities made up of those loans. Goldman Sachs and other banks were accused of encouraging underwriting of risky loans.
A spokesman for Goldman Sachs said the bank is “pleased to resolve the matter.”
Massachusetts Attorney General Martha Coakley will hold a press conference in Boston at 1 p.m. EDT to discuss the settlement.
Goldman Sachs was not considered to be a major player in either subprime mortgage origination or packaging them as securities. It is expected that Coakley will announce settlements with other banks in the weeks ahead.
Coakley’s staff estimates that Goldman Sachs could end up spending as much as another $50 million to pay down the principal owed in the subprime loans in the state that the company backed. As many as 714 borrowers could be affected.
A spokeswoman for the attorney general’s office, Amie Breton, said the bulk of Goldman Sachs’s subprime mortgages were found in Boston, Brockton, Lawrence, Springfield and Worcester.
Breton said the settlement was “the first instance in the country where an investment bank has been held accountable for their role in subprime lending.”
