(New York, USA) - Goldman Sachs and two other financial firms have reached a deal with New York regulators to reform some controversial mortgage practices, the Wall Street Journal reported Thursday.
Under the deal, Goldman, its Litton Loan Servicing business, and Ocwen Financial Corp. have agreed to stop so-called "robo-signing," in which bank employees sign off on foreclosure agreements without reviewing case files.
They also committed to reviewing borrowers' paperwork to ensure they haven't mishandled it, and to cut mortgage payments for some New York homeowners, the Journal said, adding that the agreement would be announced later on Thursday.
The newspaper said the settlement would mainly affect mortgage servicers -- companies that collect monthly house payments and pass them on to investors and lenders, process foreclosures and help troubled borrowers restructure loans.
After banks and other financial firms lent freely to borrowers with weak credit histories during the housing bubble, the financial crisis saw mortgage services get hit with a wave of late payments and defaults.
Many investors and borrowers accuse the servicers of breach of contract, and courts have been overwhelmed with lawsuits.
The Journal said the New York case could serve as a template for reforming other major lenders.
It said the five biggest mortgage banks -- Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally Financial -- were negotiating with state attorneys general over settlements that could see the banks pay billions of dollars in return for protection from future legal action.
The reforms demanded by New York regulators were a condition for the approval of Goldman's sale of Litton to Ocwen, the Journal said.
