The Federal Housing Finance Agency is talking with Goldman Sachs about a settlement over the mortgage-backed securities the investment bank sold to Fannie Mae and Freddic Mac before the financial crisis. Goldman Sachs is expected to pay between $800 million to $1.25 billion. The settlement would keep Goldman from going to trial in September in the U.S. District Court in Manhattan. This settlement will set Goldman Sachs' litigation payout record. In 2010, the bank admitted that it made "a mistake" in marketing mortgage linked product and it paid $550 million to settle with the Securities and Exchange Commission. That was the bank's largest legal penalty, but this settlement is expected to top that. The FHFA filed 18 lawsuits against different banks in 2011 over $200 billion in toxic mortgage-backed securities. So far, it has recovered about $16 billion in agreements with several banks. TheStreet's Julia Sun reports from New York.