Goldman Sachs, Morgan Stanley Agree to Pay $557M in Foreclosure Deal

Nine days after an ""$8.5 billion foreclosure settlement"":http://dsnews.comarticles/ten-banks-reach-85m-deal-with-regulators-in-foreclosure-settlement-2013-01-07 was reached between regulators and 10 servicers, Goldman Sachs and Morgan Stanley struck a similar deal to settle allegations of wrongful foreclosure.

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On Wednesday, the ""Federal Reserve"":http://www.federalreserve.gov/ announced ""Goldman Sachs"":http://www.goldmansachs.com/ and ""Morgan Stanley"":http://www.morganstanley.com/ will pay $557 million in cash payments and other mortgage assistance. The breakdown includes $232 million in direct payments to eligible borrowers and $325 million in assistance such as loan modifications.

More than 220,000 borrowers' homes were in foreclosure in 2009 and 2010 while being serviced by former subsidiaries of Goldman Sachs (Litton Loan Servicing LP) and Morgan Stanley (Saxon Mortgage Services, Inc.), making those borrowers eligible for cash payments. Depending on the servicing error, payments can range from hundreds of dollars to $125,000.

The previous 10 servicers who reached an agreement with regulators January 7 were Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.

The most recent settlement brings the total to $9 billion.