Goldman Sachs and Morgan Stanley reached a multimillion-dollar settlement with the Federal Reserve Jan. 16 over the banks’ alleged foreclosure abuses, The Wall Street Journal reported.
Terms of the settlement will see Goldman paying the Fed $330 million, $135 million of which will be in cash with the remainder in the form of foreclosure assistance. Morgan Stanley will pay the Fed $227 million, with $97 million paid in cash and the remainder in foreclosure aid.
As a result of the settlement, some 220,000 customers will receive compensation ranging from a few hundred dollars to as much as $125,000, depending on the foreclosure errors, the Journal reported.
Both banks had been heavily involved in the subprime mortgage market. In 2006, Morgan Stanley purchased mortgage servicer and originator Saxon Capital, Inc., and in 2007, Goldman purchased Litton Loan Servicing LP in an effort to take advantage of the distressed assets market.
Both Morgan Stanley and Goldman Sachs unloaded their mortgage servicing to Ocwen Financial, which is now the fifth largest mortgage servicing company in the country.
This settlement is the latest in a series of recent deals over alleged foreclosure abuses. On Jan. 7, 10 banks reached an $8.5 billion settlement with the Fed and the Office of the Comptroller of the Currency.