WASHINGTON, July 26 The Federal Reserve said on
Friday that GMAC Mortgage will make $230 million in cash
payments to borrowers, in a move that will end an independent,
case-by-case review of potentially flawed foreclosures.
Under the agreement, more than 232,000 borrowers who were in
the foreclosure process between 2009 and 2010 will receive
The agreement is similar to deals that bank regulators
struck with other major U.S. lenders and mortgage servicers
earlier this year.
GMAC Mortgage is a unit of Residential Capital LLC (ResCap),
which housed most of the mortgage business of troubled U.S. auto
lender Ally Financial Inc and which filed for bankruptcy last
ResCap Chief Business Officer Tammy Hamzehpour said the
company is relieved to be able to direct the settlement funds to
borrowers, rather than continuing the expensive file review
The Fed said a bankruptcy judge on Friday signed off on the
amended enforcement action.
The action stems from the "robo-signing" scandal that
emerged in 2010 involving allegations banks pursued faulty
foreclosures by using defective or fraudulent documents.
In April 2011, the government required the mortgage
servicers to review foreclosure actions from 2009 and 2010 to
determine whether borrowers had been unlawfully foreclosed on or
suffered some other financial harm due to errors in the
But the independent review proved to be inefficient, with
millions of dollars flowing to consultants before payments went
out to borrowers.
Earlier this year, the Federal Reserve and the Office of the
Comptroller of the Currency announced that banks would instead
pay a lump sum to borrowers, based on categories of harm.
The Fed said on Friday that with the addition of GMAC
Mortgage, roughly 4.4 million borrowers will receive more than
$3.8 billion in cash.
The servicers will provide an additional $5.8 billion in
other relief, including loan modifications and the forgiveness
of deficiency judgments.