Long before Goldman Sachs sold Litton to Ocwen Financial on September 1, 2011, it had been trying to offload the property.

In its mind, its experiment in building a supply chain for MBS-backed products couldn't end soon enough. Merrill Lynch and others got burned pretty badly by buying up mortgage companies, with an eye on ensuring supply for their CDO machineries. By finally selling the troubled mortgage servicer---and it did take a while---Goldman Sachs no doubt hoped that it could cut ties cleanly.

But that hasn't proven to be the case. The Fed has ordered Goldman Sachs to retain an independent consultant to review foreclosure proceedings initiated by Litton that were pending at any time in 2009 or 2010. The goal of the latest in a string of enforcement actions is to "provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process."

The foreclosure review will be consistent with the reviews currently underway at the 14 large mortgage servicers that consented to federal enforcement actions earlier this year. The Fed has previously stated that it believes fines are in order and that it will announce the financial penalties soon. We had long suggested that Litton didn't quite live up to the Goldman Sachs brand. And now the deal has come back to bite it. This is not nearly as bad as Bank of America's purchase of Countrywide, but it's fair to say that it has also been a failure. The synergies just weren't there.  

For more:
- here's the release

Related articles:
Goldman Sachs sells mortgage servicing unit  
Goldman Sachs closer to sale of Litton