The Federal Reserve has reached agreements in principle with Goldman Sachs and Morgan Stanley to pay $557 million in cash payments and other assistance to help mortgage borrowers. These agreements are similar to the foreclosure settlement announced last week between 10 mortgage servicing companies and the Office of the Comptroller of the Currency (OCC) and the Federal Reserve.
According to the Fed, 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 under the agreements in principle. Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error.
The Fed adds that a payment agent will be appointed to administer payments to borrowers on behalf of the servicers. Eligible borrowers are expected to be contacted by the payment agent by the end of March with payment 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.