Goldman Sachs has reached a $5.1bn settlement with the US government and other agencies for mis-selling mortgage-backed securities in the run-up to the financial crisis, in a move that will wipe out most of its profits for the fourth quarter.

On Thursday afternoon Goldman said it would pay a $2.4bn civil monetary penalty to the Department of Justice, and make $875m in cash payments to various other agencies. The bank said it would also provide a total of $1.8bn in relief for distressed borrowers and underwater homeowners, financing for affordable housing, and support for other programmes to boost the housing sector.

Lloyd Blankfein, chairman and chief executive, said in a statement that the bank was “pleased to have reached an agreement in principle to resolve these matters.”