April 29 (Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley will start sending checks this week to borrowers foreclosed on by the banks’ former mortgage-servicing units , according to the Federal Reserve.
The two New York-based banks will pay $247 million to almost 224,000 borrowers, the Fed said today in a statement. The checks -- meant to compensate borrowers who may have been mistreated in foreclosures during 2009 and 2010 that relied on improper documentation or faulty procedures -- range from $300 to $125,000, depending on the how much harm may have been done.
Goldman Sachs and Morgan Stanley foreclosed on homes of 49 military members eligible for borrower protections and three homeowners who weren’t in default, two groups in the category of those getting the most money, the Fed said. The loans were handled by Goldman Sachs’s Litton Loan Servicing LP and Morgan Stanley’s Saxon Mortgage Services Inc., both of which were sold to Ocwen Financial Corp. after the period covered by the accord.
The Wall Street firms were among 13 U.S. mortgage servicers who agreed to a $9.3 billion settlement with federal regulators. The accord called for $3.6 billion in cash payments to borrowers, with the remaining money going to help prevent future foreclosures. All borrowers who were targeted for foreclosure in 2009 and 2010 are scheduled to get some payment, whether or not they were harmed by the servicers.
Checks have already gone out from other companies that settled with the Fed and Office of the Comptroller of the Currency, including JPMorgan Chase & Co. and Bank of America Corp.
About 1.3 million checks for $1.2 billion have been cashed or deposited, Bryan Hubbard, an OCC spokesman, said in an interview. The checks are clearing about four times faster than in dozens of past consumer settlements, Hubbard said.
Mark Lake, a Morgan Stanley spokesman, declined to comment on the Fed’s announcement. Goldman Sachs didn’t immediately respond to a call seeking comment.
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