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The Other Foreclosure Settlement: Millions of Homeowners Eligible

NEW YORK (CNNMoney) -- Millions of borrowers who suffered financial losses because their mortgage lenders played fast and loose while processing their foreclosures now have two ways of getting a payback.

They can tap the $26 billion settlement between the state attorneys general and the nation's five biggest banks that was inked two weeks ago.

But there is also an earlier settlement that has been nearly forgotten -- and that could lead to an even bigger payoff, in some cases.

As part of an enforcement action by federal authorities last April, 14 mortgage servicers, including Bank of America, Chase, Citibank, HSBC, MetLife Bank, PNC Mortgage and Wells Fargo, agreed to hire independent consultants to investigate foreclosure abuses and compensate those who suffered financial harm.

As a result of the program, up to 4.3 million mortgage borrowers who were foreclosed on in 2009 and 2010 will have a chance to request an independent review of how their foreclosure was handled.

So far, only 90,000 eligible homeowners have submitted claims, prompting the feds to extend the deadline for applications by three months to July 31.

The exact amount of money borrowers will receive has yet to be determined. But if a review finds that “financial injury” occurred -- say a bank charged inappropriate fees or it went forward with a foreclosure without a valid claim to the property -- a homeowner could be repaid in full for their losses.

Borrowers who were improperly charged even just a single fee could be repaid for it, according to Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, one of the federal regulatory agencies that negotiated the agreement.

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