Goldman agreed to pay $60 million in a settlement to resolve complaints filed by Massachusetts Attorney General Martha Coakley over claims that Goldman Sachs arranged very risky high-rate mortgage loans to borrowers with poor credit, leading to the addition of thousands of homes to forclosure lists.

The amount of $10 million will be given to the state and the rest will be spent to help solve the problems of thousands of borrowers whose houses have been added to foreclosure lists.

Amie Breton, spokeswoman for Massachusetts Attorney General Coakley, said that the settlement was one of the results of investigations on U.S. largest banks that originated mortgage loans and then bundled them into mortgage bonds to be sold to various investors.

Breton explained that the agreement with Goldman Sachs was the first settlement between a state and an investment bank related to the crisis of overloaded foreclosure lists.

The packaging of mortgage loans into securitized mortgage investments has been one of the major blocks to the federal government’s loan modification program. Many distressed homeowners applying for loan repayment schemes to save their houses from being added to foreclosure lists are being rejected because their loans have been repackaged for investors.

Michael DuVally, spokesperson for Goldman Sachs, said he is glad the problem with Massachusetts has been settled.

Housing analysts and economists argue that the subprime crisis caused the housing collapse that subsequently contributed to the economic downturn nationwide and worldwide. Many analysts even point to the subprime crisis, which led to long forclosure listings, as the sole initial cause of the nationwide economic crisis and the global recession.

Many critics, including legislators and economists, point to the greed of some Wall Street firms as the cause of the subprime market collapse. They claim that Wall Street firms pressured mortgage brokers to make a lot of loans that can be packaged into securities and then sold to investors.

The failure of mortgage lenders to screen borrowers led to the origination of loans for borrowers who cannot afford to pay and whose houses were later added to foreclosure lists.

These cities should take a lesson or two on how to stave off cheap houses for sale from Boston, Massachusetts.

Cheap houses for sale due to foreclosures reached a total of 1,215 in Boston in 2008. These figures were not remarkable compared with the number of cheap houses for sale in other cities.

Boston has successfully controlled the number of its cheap houses for sale due to foreclosures because of its aggressive approach to the foreclosure crisis.

This is how the strategy works in controlling the increase in the number of foreclosure homes in Boston. The city would buy a foreclosed home that has been abandoned and vacant for some time. After dealing with the mortgage servicer, the city would then packaged the repossessed home with other properties and sell them to the construction company, Built-Rite for the same cost that it paid per unit.

Built-Rite will then rehabilitate the said properties and sell them at a much higher price.

The city’s foreclosure prevention program is part of Boston Mayor Tom Menino’s Foreclosure Intervention Team which focused on streets, neighborhoods and communities with a high number of foreclosure properties, such as Dorchester, Hyde Park, Roxbury and Mattapan.

The mayor’s foreclosure intervention team would bring in police in target areas to prevent crime. The team also improves the street, public spaces and lighting and provides support to distressed homeowners who wanted to make some repairs.

This strategy ensures that communities with high foreclosure rates would not deteriorate and affect neighboring areas.

Menino has directed his intervention team to look and identify where it can eliminate the plague caused by foreclosures.

The reasons why Menino’s team was able to control the spread of foreclosure in the city were first, the economy has not bottomed out and second, they were able to anticipate the crisis. For several years now, the city has a program to encourage potential homebuyers to deal only with lenders who have good business reputation and to choose their loans wisely.

The city also provides funds to help homeowners save their properties from foreclosures. To date, it has saved over 450 properties, reducing by 20 percent its cheap houses for sale.