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Why Is Goldman on a Buying Spree for Delinquent Mortgages

Friday, March 17, 2017 13:17
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(Before It's News)

Last year Goldman Sachs entered into a settlement with federal and state governments over its role in packaging and selling toxic mortgage-backed securities in the housing meltdown to unsuspecting buyers while subsequently turning around and shorting those very same securities.  As part of the settlement, Goldman agreed to provide $1.8 billion in homeowner debt relief to delinquent U.S. borrowers.

The only problem with the settlement is that Goldman doesn’t actually own any mortgage debt, they prefer to package it up into pretty little bundles, slap a AAA rating on it and sell it to pension funds for a fee instead.

Of course, that’s not a problem for Wall Street’s vampire squid because they’ve found a whole other way to satisfy the entire $1.8 billion settlement without funding a single penny of that obligation in cash, in fact, they’re making money on the scheme. 

So, how does it work?  Well, the first step is to buy up billions of dollars worth of non-performing loans (NPLs) at massive discounts of up to 50 cents on the dollar.  Then, you negotiate mortgage modifications with borrowers that reduces their principle balance, of course by less than Goldman’s initial discount on the original purchase, and allows them to start making payments again.  That principle foregiveness then gets counted towards Goldman’s $1.8 billion mortgage relief obligation even though it actually cost them absolutely nothing because they acquired the debt at an even larger discount.  Finally, and this is the real beauty of the scheme, when the loans are performing again they can be packaged up and resold as AAA paper once again…

Here’s a quick example of how it might work on an individual mortgage:

Lets assume a borrow has a $200,000 mortgage outstanding but isn’t making payments.  Goldman then comes along and buys that mortgage for $100,000 from Fannie Mae.  Goldman then goes to the borrower and offers to reduce his mortgage balance to $150,000 if, in return, he’ll agree to start making payments again.  That $50,000 debt reduction then gets applied to Goldman’s $1.8 billion settlement obligation. And the coup de gras, once the loan is performing again, Goldman can sell it for $150,000, thus pocketing a $50,000 cash profit plus settling $50,000 of their obligation to various government entities.

GS

As the Wall Street Journal notes today, to our great ‘shock’ nonetheless, Goldman has suddenly become the largest buyer of Fannie Mae’s NPLs, having purchased $5.7 billion worth of unpaid loans over the past several months.

Over the past year-and-a-half, the Wall Street giant has become the largest buyer of severely delinquent home loans from mortgage giant Fannie Mae. The firm has acquired nearly two-thirds of $9.6 billion in loans the agency has auctioned, representing unpaid loan balances of $5.7 billion, a Wall Street Journal review of government records shows.

In all, Goldman has spent roughly $4.5 billion on some 26,000 Fannie-owned loans, according to the government records. It has also been buying mortgages, in smaller size, from private sellers and Freddie Mac, Fannie’s sibling, according to county records, government filings and traders.

On Tuesday Goldman won the majority of loans at Fannie’s latest auction, its largest to date. The bank bought about 8,000 loans with unpaid balances of $1.4 billion.

Goldman has paid between 50 and 90 cents on the dollar for the loans, according to Fannie Mae records.

Meanwhile, because Goldman is getting credit toward fulfilling the terms of its settlement, it can afford to pay more for delinquent loans than other competing bidders, which essentially means they’ve cornered an entire market.

Just another beautiful Obama-era ‘deal’ for U.S. taxpayers…Obama gets to publicly take credit for ‘punishing’ the evil vampire squid of wall street all while privately tossing them a sweetheart deal…seems that Hillary isn’t the only politician with conflicting ‘public’ and ‘private’ positions on key issues.

h/t @davidschawel



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Total 16 comments
  • Redlist Renegade

    Them’s some SLICK WEASELS , them boys at Goldman Saks (JUST like their good old boy buddies in the good old Federal Government !!! No WONDER they’re all “Thick as Thieves” ’cause they ARE all thieves) !!!

  • PaulTarsuss

    God bless’em. Every one.

    • beLIEve

      RiP

      ROT in PERPETUITY

  • carolina4

    i don’t know why. by the time americans are done with them they won’t own squat. not one grain of sand. not one speck of mineral. not one drop of water.

  • cbanse

    If Fannie Mae knows what Goldman Sachs is doing, why don’t they just negotiate deliquent loans themselves instead of selling them at half-price? In the end, the public gets screwed because public officials are either too dumb to think outside the box…or have their hands tied by regulations authored by the banks.

  • Josie

    Why do you think they are on a buying spree, to take advantage of poor unfortunate people who have come on hard times, can’t pay their mortgages and are losing their homes. The greedy Goldman Sachs is stuffing their pockets with the hope and dreams of others.

    • Pateriot

      Although they are benefiting from the deal, the “poor unfortunate” benefit as well. The principles on their homes have been reduced and they can continue to live in them, which they can now more easily afford. Sounds like a win-win to me. Fannie May/Freddie Mac (the taxpayer) is the true loser… not because of Goldman Sachs scheme however, but because Fannie May and Freddie Mac CONTINNUE to back lending money for houses that people cannot afford (or simply won’t pay back)… which is what got us into our last near catastrophic debacle!

      • VirusGuard

        No they just become the property of landlords who then pay taxes on the profit and you seem to forget that interest rates charged by the jewish bankers can go up but they can hardly go down since they are near to zero as it is.

        Landlords might just hand the keys back in when they go bust but home owners should set the place on fire before giving the keys back and then lets see if the rules get changed by the bankers that think they own all the cards in this game.

  • cbanse

    Why can’t FNMA negotiate the loans theselves instead of having a fire sale? Oh wait, their hands were tied by regulations written by the banks.

  • sarah

    It’s not too late to burn the banking sorcerers at the stake.

  • rabidjackrussell

    The ‘BIG SHORT’ movie comes to mind :!: :!: :!:

    https://www.youtube.com/watch?v=LWr8hbUkG9s

  • carolina4

    my mother who is in the know, told me that no one owns their homes in america. it all belongs to berkshire hathaway, goldman sachs, trusts and hedge funds owned by the 1%. i wanted to ask her who owns her house, but i knew she would tell me that they are one of the few.

    • Pateriot

      It is true you never really own your home. After you have paid off your mortgage to the bank you borrowed the money from, you spend the rest of your life paying the state (property taxes) for the privilege of living there. Ultimately it is the state that you live in that truly owns your home or other real estate.

  • Redlist Renegade

    Goldman SUCKS !!!

  • unidentified

    what they do is try to bundle up as much real estate as possible and then sell it on the open market to global investment groups, this is not just an american practice, it doesnt really effect the rich elites but it does effect the cost of living in many desirable markets where only well to do people can afford to live there

  • VirusGuard

    Goldman are jewish bankers, people know this but they don’t understand that jews also control the FED and the IMF too or question Ben Bernake or Greenspan all coming from Israel too.

    Land with planning permision is being controlled by the bankers and this is why rents are high (not tax deducatable for domestic dwellings) so the government get it’s share too from the deal.

    Sign up for a 25 year housing loan, become a debt slave (Rat is a better name) or spend a few days painting the ton red and then lets see if they nice bankers will give us a little land to live on and build our home because the current system is not working and we need to enfoce our so called “Human Rights” using rope if needs be.

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