(NEW YORK) -- Ten banks have reached an $8.5 billion foreclosure abuse settlement with regulators. This is not the first or the biggest of such settlements, but another in a series of settlements and lawsuits coming out of the now several-years-old housing bubble.
The deal provides billions in direct payments to 3.8 million homeowners who were forced into foreclosure in 2009 and 2010. The Fed says they were subjected to “unsafe and unsound” practices by banks.
In addition to the direct payment, banks will pay $5 billion for loan modifications and other assistance to millions more struggling to stay in their home.
This settlement comes out of the so-called “robo-signing” scandal, where banks were found to be fast tracking foreclosures without adequate paperwork.
Borrowers eligible for payment do not need to take any action; they will be contacted by a “payment agent” set up as part of this settlement. If a borrower thinks they should be eligible, they should contact their bank.
This agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo. Regulators are still negotiating with some servicers, so the size of the settlement could grow.
State Attorneys generals came to a somewhat similar $25 billion settlement with banks last year.
Monday's announcement is separate from Bank of America’s more than $10 billion settlement with Fannie Mae announced earlier in the day.
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