Goldman Settles Mortgage Probe: Report

NEW YORK (TheStreet) - Three major mortgage loan servicers have entered into a settlement with the New York State Department of Financial Services, agreeing to end "robo-signing" of mortgage foreclosure documents and make other servicing improvements, according to a Wall Street Journal report.

The agreement -- between Goldman Sachs (GS), its subsidiary Litton Mortgage Services and Ocwen Financial (OCN) -- is expected to be announced Thursday, according to the Journal, which cited unnamed sources.

Under the agreement, the loan servicers will cut mortgage payments for some New York borrowers, with Goldman agreeing to $13 million in principal reductions for Goldman's $52 million in New York mortgage loans. The servicers will also check loan files for mishandling of paperwork, according to the report.

Ocwen in June agreed to purchase Litton from Goldman for $264 million in cash, and the mortgage servicing settlement was a condition for New York Superindendent of Financial Services Benjamin Lawsky's approval of the Litton purchase.

With New York State overseeing a large portion of the mortgage loan servicing industry, the state's settlement with the mortgage servicers could shed light on the nature of an eventual settlement between largest U.S. servicers, including Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Walls Fargo (WFC), and Ally Financial, the 50 state attorneys general and federal regulators, of various claims over the mishandling of mortgage foreclosures and other loan servicing problems.

-- Written by Philip van Doorn in Jupiter, Fla.

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