Goldman takes on new role: taking away people's homes
SAN JOSE, Calif. — When California wildfires ruined their jewelry business, Tony Becker and his wife fell months behind on their mortgage payments and experienced firsthand the perils of subprime mortgages.
The couple wound up in a desperate, six-year fight to keep their modest, 1,500-square-foot San Jose home, a struggle that pushed them into bankruptcy.
The lender with whom they sparred, however, wasn't the one that had written their loans. It was an obscure subsidiary of Wall Street colossus Goldman Sachs Group.
Goldman spent years buying hundreds of thousands of subprime mortgages, many of them from some of the more unsavory lenders in the business, and packaging them into high-yield bonds. Now that the bottom has fallen out of that market, Goldman finds itself in a different role: as the big banker that takes homes away from folks such as the Beckers.
The couple alleges that Goldman declined for three years to confirm their suspicions that it had bought their mortgages from a subprime lender, even after they wrote to Goldman's then-Chief Executive Henry Paulson — later U.S. Treasury secretary — in 2003.
Unable to identify a lender, the couple could neither capitalize on a mortgage hardship provision that would allow them to defer some payments, nor on a state law enabling them to offset their debt against separate, investment-related claims against Goldman.
In July, the Beckers won a David-and-Goliath struggle when Goldman subsidiary MTGLQ Investors dropped its bid to seize their house. By then, the college-educated couple had been reduced to shopping for canned goods at flea markets and selling used ceramic glass.
Theirs is an infrequent happy ending among the hundreds of cases in which subsidiaries of Goldman, better known for sending top officers such as Paulson to serve in top Washington posts, have sought to contain bondholder losses by foreclosing on properties and evicting delinquent borrowers.
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