(By Balachander) Goldman Sachs Group Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS) have agreed to pay a total of $557 million to settle federal complaints of deficient practices in mortgage loan servicing and foreclosure processing.
Under the agreement, 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.
[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]
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.
The agreements announced with the U.S. Federal Reserve are similar to those announced earlier this month between 10 mortgage servicing companies.
Combined, the 12 companies will pay around $9 billion, U.S. federal regulators said.
The Fed said more than 4 million borrowers will receive a total of $3.5 billion in cash compensation following the addition of Goldman Sachs and Morgan Stanley. An additional $5.5 billion will be provided by the servicers for mortgage assistance.
The Fed had reached agreements with Aurora, Bank of America (BAC), Citibank (C), JPMorgan Chase (JPM), MetLife Bank (MET), PNC, Sovereign, SunTrust (STI), U.S. Bank, and Wells Fargo (WFC).
[Related -Gold hasn’t lost its allure in my portfolio]
The federal regulator said it continues to work to reach similar agreements with other servicers that are not yet parties to the agreements, but that are also subject to similar enforcement actions.