The Federal Reserve Board said it plans a formal enforcement action against the Goldman Sachs Group and Goldman Sachs Bank USA.

The action is aimed at addressing "a pattern of misconduct and negligence relating to deficient practices in residential mortgage loan servicing and foreclosure processing" that involve its former unit Litton Loan Servicing.

Goldman Sachs sold Litton to Ocwen Financial Corp. today and has ceased to conduct residential mortgage servicing. Litton is the 23rd largest mortgage servicer in the U.S..

The action orders Goldman Sachs to retain an independent consultant to review foreclosure proceedings initiated by Litton that were pending at any time in 2009 or 2010.

The review is intended to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process.

The foreclosure review will be conducted consistent with the reviews currently underway at the 14 large mortgage servicers that consented to enforcement actions brought by the banking agencies on April 13.

If Goldman Sachs re-enters the mortgage servicing business while the action is in effect, it will be required to implement enhanced corporate governance, risk-management, compliance, borrower communication, servicing and foreclosure practices comparable to what the 14 mortgage servicers are implementing.

The Federal Reserve said earlier said earlier this year that it believes monetary sanctions are appropriate and plans to announce monetary penalties.

These monetary penalties against Goldman Sachs will be in addition to the corrective actions that Goldman Sachs will be taking pursuant to today's action.

Goldman Sachs has acknowledged in today's action that it will be responsible for satisfying any civil money penalty that the Board of Governors could have assessed against Litton for its conduct.

 

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