"It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers," Curry said.
Thompson agreed that the earlier review process was deeply flawed and said the move toward direct payments is a positive development. But she said the deal will only work if it includes strong oversight and transparency provisions.
"It's another get out of jail free card for the banks," said Thompson. "It caps their liability at a total number that's less than they thought they were going to pay going in."
Citigroup said in a statement that the bank is "pleased to have the matter resolved" and believes the agreement "will provide benefits for homeowners." Citi expects to record a charge of $305 million in the fourth quarter of 2012 to cover its cash payment under the settlement. The bank expects that existing reserves will cover its $500 million share of the non-cash foreclosure aid.
Bank of America CEO Brian Moynihan said the agreements were "a significant step" in resolving the bank's remaining legacy mortgage issues while streamlining the company and reducing future expenses.
Leaders of a House oversight panel asked regulators for a briefing on the proposed settlement on Friday. Regulators refused to brief Congress before announcing the deal publicly.
Maryland Congressman Elijah Cummings, the top Democrat on the House Committee on Oversight and Government Reform, said in a statement that he was "deeply disappointed" in the regulators' actions.
"I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered," Cummings said. He said regulators have failed to answer key questions about how the settlement was reached, who will get the money and what will happen to others who were harmed by these banks but were not included in the settlement.
The settlement is separate from a $25 billion settlement between 49 state attorneys general, federal regulators and five banks: Ally, formerly known as GMAC; Bank of America; Citigroup; JPMorgan Chase and Wells Fargo.
Daniel Wagner can be reached at www.twitter.com/wagnerreports .