Goldman forecloses on over 10K homes for ‘consumer relief’
Matthew Goldstein
To make amends for its part in the collapse of the housing market during the 2008 financial crisis, Goldman Sachs promised $1.8 billion in consumer relief to struggling homeowners.
That penance was also a business opportunity.
Four years after agreeing to help homeowners in a civil settlement with federal prosecutors, Goldman has become one of the biggest buyers of distressed mortgages, an area of investing that deals in loan modifications and foreclosures for borrowers who can’t make their payments.
And while Goldman has reworked loans to make it possible for thousands of homeowners to avoid foreclosure, it has also taken back more than 10,000 homes — properties it has started to sell to help offset the cost of the assistance it provides, a review of data shows.
“They are profiting off of this,” said George Daly, who almost lost his home in Millville, New Jersey, to Goldman after it bought his mortgage as part of the consumer relief program.
Daly, a retired auto mechanic who has lived in the home for 22 years, said the firm that Goldman had contracted to manage his mortgage — Shellpoint Mortgage Servicing — was unwilling to consider a loan modification unless he made a $14,000 payment upfront. Then, just a few months after his wife, Susan, died of complications from cancer, he heard from lawyers for Goldman’s mortgage subsidiary — MTGLQ Investors, short for mortgage liquidation. They told him that they were pushing ahead with foreclosure.
Daly, 61, was able to keep his house only because his frantic online searching turned up information on New Jersey’s foreclosure relief fund, which gave him a $49,000 grant to pay off the delinquent fees and resume his monthly payments.
Goldman declined to discuss Daly’s case, but it defended its handling of the mortgages it had bought, saying it does better by homeowners than other firms that operate in the same market.
“Our overarching goal is to do modifications and get the nonperforming mortgages we purchase performing,” said Maeve DuVally, a Goldman spokeswoman.
Goldman came to own Daly’s loan because of the consumer relief provision of a $5 billion settlement for marketing and selling faulty mortgage securities to investors. Unlike other banks, Goldman originates few mortgages of its own, and to help struggling borrowers it had to buy their distressed mortgages. It has bought more than 30,000 of them — mostly from Fannie Mae and Freddie Mac.
Investors in distressed mortgages buy them at a discount and seek ways to spin money out of soured loans. They can take over the property — by either foreclosing or persuading the borrower to simply walk away — and sell it. Or they can modify the loan to make it possible for the borrower to start paying.
In the niche market for buying distressed loans or foreclosed homes, Goldman is second in foreclosures over the past four years to the combined affiliates of Lone Star Funds, a Dallas private equity firm, according to an analysis compiled by Attom Data, a real estate information firm.