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Goldman Sachs, Wells Fargo May Face SEC Charges Over Mortgage Bonds

nasdaq.comFeb 29, 2012

(RTTNews.com) - Goldman Sachs Group Inc. (GS) and Wells Fargo & Co. (WFC) have been warned by federal regulators that they may face enforcement action related to their sales of mortgage-backed securities that played a major role in the 2008 financial crisis.

Goldman Sachs and Wells Fargo said in regulatory filings on Tuesday that they received Wells notices from the U.S. Securities and Exchange Commission or SEC, indicating that the companies may face civil suits.

A Wells notice is sent by the SEC to people or companies indicating that it is considering recommending a civil enforcement action against them. The notice provides the company or person with the chance to provide information as to why enforcement action should not be taken against them. However, regulators are not legally required to provide a Wells notice.

Goldman Sachs said that on February 24, it received a Wells notice from the SEC that is related to an offering underwritten by the company in late 2006 of about $1.3 billion in subprime residential mortgage-backed securities.

The company said it will provide information and plans to engage in a dialogue with the SEC staff to address their concerns.

Wells Fargo, the largest home lender in the U.S., said earlier on Tuesday that it has also received a Wells notice related to its disclosures in offering documents for mortgage-backed securities.

The bank said it is providing information requested by various regulatory agencies in connection with their investigations. Wells Fargo and four other mortgage servicers agreed in February to a $25 billion settlement with state and federal agencies regarding mortgage servicing, foreclosure and origination issues.

Mortgage-backed securities consist of pools of mortgages that are bundled together by a government or private entity, and sold to investors. The entity then issues securities that represent claims on the principal and interest payments made by borrowers on the loans in the pool, a process known as securitization.

The collapse in value of these securities played a major role in the financial crisis of 2008 and caused billions in losses to investors.

Regulators are examining the disclosures made by banks in mortgage-backed securities offerings to determine whether they misled investors about the quality of loans sold by them.

Other government agencies, including state attorneys general and the U.S. Department of Justice, are also continuing to investigate various mortgage related practices of major mortgage servicers.

Goldman has been under severe scrutiny from several government agencies since the financial crisis. The company was first blamed for its outsize pay packages while most of country was suffering from the crisis. In April 2010, the company had to pay $550 million to the SEC to settle a civil fraud suit on subprime mortgages.

In Wednesday's regular session, GS is trading at $117.16, up $0.05 or 0.04 percent on a volume of 974,357 shares. WFC is trading at $31.73, up $0.36 or 1.14 percent on a volume of 3.97 million shares.


Back to February 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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