NEW YORK ( TheStreet) -- Goldman Sachs ( GS) and Morgan Stanley ( MS) have agreed to pay $557 million in cash payments and other assistance to mortgage borrowers, the Federal Reserve said on Wednesday. The settlement is similar to the one struck earlier this month, when
ten mortgage servicers agreed to pay $8.5 billion in cash and mortgage assistance to borrowers. Goldman and Morgan Stanley will pay $232 million in direct payments to eligible borrowers and $325 million in other assistance such as loan modifications and forgiveness of deficiency judgements. The settlement money will go to 220,000 borrowers whose homes were foreclosed upon in 2009 and 2010 by the former servicing subsidiaries of Goldman and Morgan Stanley. Borrowers could receive anywhere between a few hundred dollars to $125,000, depending upon the servicing error. With the addition of Goldman and Morgan Stanley to the settlement, more than 4 million borrowers will receive a total of $3.5 billion in cash compensation while an additional $5.5 billion will be provided by the servicers for mortgage assistance. Regulators entered into the settlement with servicers after determining that the independent foreclosure review process, mandated under an enforcement action in 2011 following the robosigning scandal, was proving too costly and was largely ineffective in providing borrower relief. With the settlement, servicers can cease the foreclosure review process. The Fed said that it continues to work to reach similar agreements with other servicers named in the enforcement action. -- Written by Shanthi Bharatwaj in New York.