Goldman Sachs spent years buying hundreds of thousands of subprime mortgages during the real estate boom, packaging them into high-yield bonds. Now that the bottom has fallen out of the property market, the Wall Street behemoth finds itself in a different role: taking homes away from Americans defaulting on their loans.
That's according to a lengthy investigation by McClatchy Newspapers . The report says there are hundreds of cases in which subsidiaries of Goldman have sought to contain bondholder losses by foreclosing on properties and evicting delinquent borrowers.A Goldman spokesman declined to comment to McClatchy on individual cases or on the firm's new role in bankruptcy courts.
But the report says Goldman has joined other Wall Street firms who lost big on subprime mortgages in going to courts from California to Florida seeking approval to foreclose on the homeowners who couldn't pay their mortgages.
Some borrowers were speculators or homebuyers who exaggerated their incomes on loan applications. Others were victims of mortgage brokers who didn't explain that the loans' interest rates could rise significantly.
Subprime borrowers were supposed to provide a safe income stream for investors who bought mostly high-grade, triple-A-rated bonds from Goldman and bigger subprime players. Now, millions of these borrowers have defaulted on mortgage payments, contributing to a historic slump in home prices and depressing the bonds' value.
The report is part of an occasional series by McClatchy on the problems in mortgage finance.
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