About 4.2 million eligible homeowners who underwent foreclosure in 2009 and 2010 will start receiving cash payments ranging from $300 to $125,000.
The payouts are part of a $3.6 billion settlement over foreclosure mishandlings reached among 13 mortgage servicers and the government.
Military service members whose homes were repossessed while they were on active duty will receive the largest checks - $125,000. The Servicemembers Civil Relief Act prevents military personnel from being foreclosed on while on active duty.
Other homeowners will receive payments from servicers that charged unfair fees or failed to do a loan modification.
Originally, the 13 servicers had agreed to conduct independent foreclosure reviews for each borrower, but the reviews proved too costly and time consuming, said Brian Hubbard, a spokesman for Office of the Comptroller of the Currency. Also, only about 439,000 borrowers had asked for a review out of the some 4 million who were eligible.
The following servicers are participating in the settlement: Aurora, Bank of America, Chase, Citibank, Goldman Sachs, HSBC, MetLife Bank, Morgan Stanley, PNC Mortgage, Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo. Goldman Sachs and Morgan Stanley will issue their payments to customers at a later date. All other servicers will start issuing payments to customers this week and will be completed by July.