The case-by-case review of botched foreclosures made by Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) is coming to an end. Sources briefed on the situation told Bloomberg that the two firms, along with HSBC Holdings (NYSE:HBC) and Ally Financial (ALFI.PK), are among a group of banks that may settle with the Federal Reserve and the Office of the Comptroller of the Currency this week.
Similar to this potential accord, ten mortgage servicers, including Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), and Citigroup (NYSE:C), agreed to an $8.5 billion settlement with the Fed and the OCC on Monday. In exchange for a deal that ended outside reviews of botched foreclosure claims, these financial institutions agreed to pay $3.3 billion for foreclosures made in 2009 and 2010 and $5.2 billion in other mortgage-related aid.
Federal Reserve-led discussions with Goldman Sachs and Morgan Stanley will likely result in a payment of $1.5 billion in cash and assistance for those borrowers affected by the foreclosures. As Bloomberg reported, this deal will bring the amount of money paid by the financial industry over foreclosure improprieties to $10 billion.
Initially, 14 firms were required by regulators to review foreclosures for errors under an April 2011 agreement, and in the case of mistakes, 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 settlement discussions.