News Column

Fitch: Goldman Sachs' FHFA Settlement Neutral for Credit Ratings

August 25, 2014



NEW YORK--(BUSINESS WIRE)-- The mortgage settlement between Goldman Sachs and the Federal Housing Finance Agency (FHFA) conforms to the recent pattern of lawsuit settlements made by large global banks, and Fitch Ratings says the payment will have no impact on Goldman Sachs' ratings ('A'/'F1' with a Stable Outlook).

As part of the settlement, Goldman Sachs agreed to pay $3.15 billion to repurchase mortgage-backed securities from Fannie Mae and Freddie Mac, which will make them whole on their investments. The economic value of the settlement is estimated at $1.2 billion, which reflects the difference between the $3.15 billion cash payment and the GSEs' net carrying value of the securities repurchased, which Goldman will be able to sell at a later date.

The approximate value of the settlement represents between 10%-11% of the original face value of affected mortgage-backed securities, which is roughly in line with other institutions that have recently settled. Goldman Sachs has already largely reserved for this payment. The FHFA settlement puts a key source of legal uncertainty behind Goldman Sachs.

Sixteen of the FHFA's suits against large financial institutions have now been settled, with three cases remaining. Fannie Mae and Freddie Mac have booked sizable litigation gains related to the FHFA suits in second-half 2013 and year-to-date 2014. The gains are effectively remitted to the U.S. Treasury under the terms of the net worth sweep agreement between Treasury and GSEs.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria (Jan. 31, 2014)

Peer Review: Global Trading and Universal Banks (March 27, 2014)

Applicable Criteria and Related Research:

Peer Review: Global Trading and Universal Banks

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742556

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Tara Kriss, +1 212-908-0369

Senior Director

Financial Institutions

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

or

Ilya Ivashkov, CFA, +1 212-908-0769

Senior Director

Financial Institutions

or

Media Relations:

Alyssa Castelli, +1 212-908-0540

alyssa.castelli@fitchratings.com

Source: Fitch Ratings


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