Goldman Sachs 2012 Annual Report Download - page 180

Notes to Consolidated Financial Statements
On January 16, 2013, Group Inc. and GS Bank USA
entered into a settlement in principle with the Federal
Reserve Board relating to the servicing of residential
mortgage loans and foreclosure processing. This
settlement in principle, amends the Order which is
described above, provides for the termination of the
independent foreclosure review under the Order and calls
for Group Inc. and GS Bank USA collectively to: (i) make
cash payments into a settlement fund for distribution to
eligible borrowers; and (ii) provide other assistance for
foreclosure prevention and loss mitigation over the next
two years. The other provisions of the Order will remain
in effect. The firm’s reserves for legal and regulatory
matters as of December 2012 include provisions relating
to this settlement.
In addition, on September 1, 2011, GS Bank USA entered
into an Agreement on Mortgage Servicing Practices with
the New York State Department of Financial Services,
Litton and Ocwen relating to the servicing of residential
mortgage loans, and, in a related agreement with the New
York State Department of Financial Services, Group Inc.
agreed to forgive 25% of the unpaid principal balance on
certain delinquent first lien residential mortgage loans
owned by Group Inc. or a subsidiary, totaling
approximately $13 million in principal forgiveness.
Guarantees
The firm enters into various derivatives that meet the
definition of a guarantee under U.S. GAAP, including
written equity and commodity put options, written
currency contracts and interest rate caps, floors and
swaptions. Disclosures about derivatives are not required if
they may be cash settled and the firm has no basis to
conclude it is probable that the counterparties held the
underlying instruments at inception of the contract. The
firm has concluded that these conditions have been met for
certain large, internationally active commercial and
investment bank counterparties and certain other
counterparties. Accordingly, the firm has not included such
contracts in the table below.
The firm, in its capacity as an agency lender, indemnifies
most of its securities lending customers against losses
incurred in the event that borrowers do not return securities
and the collateral held is insufficient to cover the market
value of the securities borrowed.
In the ordinary course of business, the firm provides other
financial guarantees of the obligations of third parties (e.g.,
standby letters of credit and other guarantees to enable
clients to complete transactions and fund-related
guarantees). These guarantees represent obligations to
make payments to beneficiaries if the guaranteed party fails
to fulfill its obligation under a contractual arrangement
with that beneficiary.
178 Goldman Sachs 2012 Annual Report