The cash payments promised to mortgage borrowers who may have been wronged by their banks will start going out this week but most checks will be a good bit smaller than homeowners had hoped.
Nearly 60 percent of the roughly 4 million borrowers eligible under the settlement with the Office of the Comptroller of the Currency and the Federal Reserve will receive $300, the minimum payment possible, according to data released Tuesday. About 77 percent will receive less than $1,000.
The new settlement advertises payments ranging from $300 to $125,000. Only about 1,100 people will receive the maximum amount. Most of them are military service members foreclosed on while on active duty.
The payments stem from a settlement reached in 2011 with about a dozen major banks over allegations of robosigning and other shoddy servicing practices. The banks were originally supposed to pay consultants to review individual loan files to determine who was mistreated and how much they should be compensated.
But as costs ballooned, a new settlement in January put an end to the independent foreclosure review and mandated $8.5 billion in cash payments and mortgage relief.
Charlotte-based Bank of America was to pay $1.1 billion in cash and provide $1.8 billion in mortgage relief. Wells Fargo was slated to pay $766 million in cash and commit $1.2 billion in relief.
The settlement covers borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010. It ended an independent review of loan files that the two agencies ordered in 2011.
Banks and consumer advocates had complained that the loan-by-loan reviews were time-consuming and costly and didnt reach many affected borrowers. Some questioned the independence of the consultants who performed the reviews, who often ruled against borrowers.
Consumer advocates have criticized the deal, saying the regulators settled for too low a price by letting banks avoid full responsibility for wrongful foreclosures.
The other banks in the settlement are HSBC, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank, Aurora, Morgan Stanley and Goldman Sachs.
The Associated Press contributed.