JANUARY 16, 2013, 10:23 AM

Goldman and Morgan Stanley Strike Deal Over Foreclosure Practices

BY DEALBOOK

Goldman Sachs and Morgan Stanley on Wednesday agreed to $557 million settlement with regulators over its mortgage lending and foreclosure practices, building on an earlier deal with big banks.

As part of the deal with the Federal Reserve, the two institutions will pay $232 million to borrowers, along with $325 million to help troubled homeowners with loan modifications and the like. Roughly 220,000 borrowers will receive cash payments as a result of the settlement.

The deal follows previous agreements with Bank of America, JPMorgan Chase, Wells Fargo and 7 other big lenders. In a settlement with the Fed and the Office of the Comptroller of the Currency, the banks agreed to pay $8.5 billion to resolve claims of foreclosure abuses, including the use of erroneous paperwork and flawed loan modifications. Regulators contend such practices led to wrong evictions.

“Like the other institutions, Goldman Sachs and Morgan Stanley were subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing,” the Fed said in a statement.

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