Fannie Mae just announced that Goldman Sachs subsidiary, MTGLQ Investors, just purchased another $1.88 Billion in non-performing real estate backed notes. They purchased all 5 pools of Fannie’s 14th sale.Thats 10,300 NPL’s in one sale.
Why have they become one of the top buyers of these assets? Because of a deal they worked out with the government.
Goldman lost a multi billion dollar lawsuit for it’s role in the real estate lending crash [watch The Big Short]. $2 Billion of that lawsuit was specifically designated to help consumers. After the agreement, the question became, how do they help consumers when they don’t own any mortgage notes?
Their solution: Buy non-performing loans and work out a loan modification that includes debt forgiveness.
Why? Because all debt forgiven in the loan modification will pay down it’s $2 Billion lawsuit!
So they will not “pay” the $2 Billion but it gets even better. Once they modify the loan and it becomes re-performing, they will sell the note at a profit.
Bottom line they will make money from this lawsuit without every paying out the $2 billion.