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. Like the other institutions, Goldman Sachs and Morgan Stanley were subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing.
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.
Previously, the OCC and the Federal Reserve reached agreements with Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and (more) Wells Fargo. With the addition of Goldman Sachs and Morgan Stanley, more than 4 million borrowers will receive a total of $3.5 billion in cash compensation while an additional $5.5 billion will be provided by the servicers for mortgage assistance.
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.
The Federal Reserve continues to work to reach similar agreements in principle with other servicers that are not yet parties to the agreements, but that are also subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing. Federal Reserve examiners are continuing to closely monitor the servicers' implementation of plans required by the enforcement actions previously issued against the servicers to correct the unsafe and unsound mortgage servicing and foreclosure practices.