Fed announces $557M foreclosure settlement

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WASHINGTON, Jan. 16 (UPI) -- Goldman Sachs and Morgan Stanley have agreed to pay $557 million to settle charges of improper mortgage and foreclosure processing, U.S. authorities said.

The U.S. Federal Reserve said the two banks reached an agreement similar to the $8.5 billion settlement announced Jan. 7 that involved Bank of America, JPMorgan Chase, Wells Fargo, MetLife Bank, Sun Trust, U.S. Bank, Aurora, Citibank, Sovereign and PNC.

The Fed said the settlement announced Wednesday would include $232 million in direct payments to eligible borrowers and $325 million in other compensation, such as "loan modifications and forgiveness of deficiency judgments."

The $8.5 billion settlement targeted 4 million borrowers as beneficiaries. The $557 million deal targets an additional 220,000 borrowers whose homes went through foreclosure in 2009 and 2010 with the former subsidiaries of Goldman Sacs -- Litton Loan Servicing -- and Morgan Stanley -- Saxon Mortgage Services, Inc.

Compensation could climb as high as $125,000 for an individual borrower, the Fed said.