Goldman Sachs' mortgage-servicing division, Litton Loan, was accused of denying loans without proper review.
The mortgage-serving arm of Goldman Sachs came under serious scrutiny by the Federal Reserve Bank of New York, investigating to see whether GS torpedoed borrowers' efforts to lower their loan payments through government support programs.
The inquiry was initiated from an anonymous letter sent to business media and passed on to the New York Fed. An employee at Goldman Sachs Litton Loan accused the company of rejecting loan applications without proper review.
We are in possession of the letter and are conducting an inquiry, stated a spokesperson of the New York Fed. Goldman Sachs did not issue any comment.
According to The Financial Times, the whistle-blower said that loans that were qualified for government modifications were constantly being denied.
Goldman Sachs had acquired Litton in 2007 for about $430 million, hoping to glean more information about the housing market to aid its mortgage-bond trading business. Shortly after the deal closed, the subprime housing market fell into shambles. Goldman Sachs remains a small player in the mortgage-serving industry.
Last year, Litton halted foreclosures after being criticized for how the industry processed relevant paperwork.
Litton was unavailable for comment outside regular business hours.
Goldman Sachs shares closed at $136.24 on Wednesday on the New York Stock Exchange.