The case-by-case review of the botched foreclosures claims made by Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) has ended, and the two investment banks have settled with the Federal Reserve. Together, they will pay a sum of $557 million in cash and other forms of assistance for mistakes made by their former mortgage servicing businesses.
“These agreements are similar to those announced on January 7, 2013, between 10 mortgage servicing companies and the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board,” read the Federal Reserve’s press release. “Like the other institutions, Goldman Sachs and Morgan Stanley were subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing.”
More than 220,000 borrowers whose homes went into foreclosure in 2009 and 2010 under former subsidiaries of Goldman Sachs and Morgan Stanley will be compensated per the terms of the agreement. Each eligible borrower will receive payments ranging from hundreds of dollars to $125,000, depending on severity and type of errors made by the loan servicers.
Initially, 14 firms were required by regulators to review foreclosures for errors under an April 2011 agreement, and in the case of mistakes, the banks were expected to compensate consumers. But as it became apparent that the process was too expensive and not delivering enough assistance, the plan changed, sources told The Wall Street Journal in December. This change led to the current settlements, including the $8.5 billion agreement the Federal Reserve made with JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and seven other financial institutions earlier this month.
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