The agreements are the banks' latest step toward eliminating hundreds of billions of dollars in potential liabilities related to the housing crisis that crested in 2008. When they release fourth-quarter earnings later this month, the banks hope to reassure investors that they are making progress toward addressing those so-called legacy claims.
But advocates say the foreclosure deal allows banks to escape responsibility for damages that might have cost them much more.
Regulators are settling at too low a price and possibly at the expense of the consumer, they say.
"This was supposed to be about compensating homeowners for the harm they suffered," said Diane Thompson, a lawyer with the National Consumer Law Center.
The payout guidelines already allowed wronged homeowners less compensation than the actual damages to them, she said.
Under the settlement, people who were wrongfully foreclosed on could receive from $1,000 up to $125,000.
Failing to offer someone a loan modification would be considered a lighter offense; unfairly seizing and selling a person's home would entitle that person to the biggest payment, according to guidelines released last summer by the OCC.
The agreement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. All will receive compensation, an average of $2,237 per homeowner, although the payouts are expected to vary widely.
About $3.3 billion would be direct payments to borrowers, regulators said. An additional $5.2 billion would pay for other assistance including loan modifications.
The companies involved in the settlement also include: Aurora, Citigroup, MetLife Bank, Sovereign, SunTrust, U.S. Bank, and Pittsburgh-based PNC Financial Services. The 2011 action also included GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.
The deal "represents a significant change in direction" from the original 2011 agreements, Comptroller of the Currency Thomas Curry said in a statement.
Banks and consumer advocates had complained that the loan-by-loan reviews required under the 2011 order were time consuming and costly without reaching many homeowners.
Banks were paying large sums to consultants who were reviewing the files. Some questioned the independence of those consultants, who often ruled against homeowners.