Goldman Sachs and Morgan Stanley have agreed to pay $557 million in cash payments and other assistance to help mortgage borrowers.
The payout is part of an agreement the two banks reached with the Federal Reserve Board as a result of enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing.
Previously, the Office of the Comptroller of the Currency and Fed reached agreements with 10 additional big banks. Including Goldman Sachs and Morgan Stanley, the regulators have provided more than 4 million borrowers with a total of $3.5 billion in cash compensation, while an additional $5.5 billion will be provided by the servicers for mortgage assistance.
The sum paid by Goldman Sachs and Morgan Stanley includes $232 million in direct payments to eligible borrowers and $325 million in other assistance, such as loan modifications and forgiveness of deficiency judgments.
More than 220,000 borrowers whose homes were in foreclosure in 2009 and 2010 with the former subsidiaries of Goldman Sachs (Litton Loan Servicing LP) and Morgan Stanley (Saxon Mortgage Services Inc.) will receive cash compensation.
Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of error.
An agent will be appointed to administer payments to borrowers on behalf of the servicers. Eligible borrowers will be contacted by the payment agent by the end of March with details.
Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment. In addition, the servicers' internal complaint process will remain available to borrowers.