Big Banks Cut $8.5 Billion Foreclosure Settlement Check

NEW YORK (TheStreet) -- Ten major mortgage servicers including Bank of America(BAC) , JPMorgan Chase(JPM) , Citigroup(C) and Wells Fargo(WFC) have entered into a $8.5 billion settlement with regulators to settle claims related to foreclosure abuses.

Under the terms of the settlement with the Federal Reserve and the Office of the Comptroller of the Currency(OCC), the banks will pay $ $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments. The agreement covers 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers.

The other lenders participating in the settlement are Aurora, MetLife Bank, PNC(PNC) , Sovereign, SunTrust(STI) and U.S. Bank(USB) .

By agreeing to the settlement, the lenders can cease the independent foreclosure review process mandated under an enforcement action in April 2011.

Regulators had determined that the foreclosure review process, which involved a case-by-case review of millions of loan files, was proving too expensive, time consuming and ineffective.

"When we began the Independent Foreclosure Review, the OCC pledged to fix what was broken, identify who was harmed, and compensate them for that injury. While today's announcement represents a significant change in direction, it meets those original objectives by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner," OCC chief Thomas Curry said in a statement.

"We have learned a great deal from the reviews that have been conducted to date. However, it has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers. Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation's housing markets," he said.

Earlier press reports had suggested that 14 lenders would be participating in a settlement totaling $10 billion.