The settlement was similar to deals struck earlier this month with 10 other major banks and mortgage lenders last week. The money will go toward paying homeowners who were wrongfully foreclosed on.
Goldman Sachs and Morgan Stanley will pay a combined $557 million to settle federal complaints that they wrongfully foreclosed on homeowners who should have been allowed to stay in their homes.
Under the settlement, Goldman and Morgan Stanley will pay $232 million in cash compensation to homeowners to end an independent review of loan files required under a 2011 action by the Fed and the Office of the Comptroller of the Currency. The remaining $325 million will be used to reduce mortgage balances and to forgive outstanding principal on home sales that generated less than borrowers owed on their mortgages.
About 220,000 people whose homes were in foreclosure in 2009 and 2010 are eligible for payments under the deal with the two banks, the Fed said. The payments could range from hundreds of dollars up to $125,000, depending on the type of possible error.
The structure of the deal is nearly identical to the $8.5 billion settlement announced last week with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora.