It would help more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010.
The payments involve mortgage servicers operating under enforcement actions issued in April 2011 by the OCC, the Federal Reserve and the Office of Thrift Supervision.
As a result of this agreement, the participating servicers would stop the Independent Foreclosure Review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation much faster.
Many involved in the process complained that the reviews were taking too long and the needed money wasn't getting out to those affected by the housing crash.
The "announcement represents a significant change in direction," Comptroller of the Currency Thomas Curry said in a statement.
"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.
"Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation’s housing markets."
Rep. Maxine Waters (D-Calif.), ranking member of the Financial Services Committee, agreed that while the agreement marked the end of the Independent Foreclosure Review (IFR) process it left unanswered questions about how the details of the settlement were determined.
"I’m pleased that the OCC has recognized these concerns and acknowledged that the IFR process was poorly designed and executed," she said Monday.
"However, the blanket settlement announced today raises several significant questions that must be answered before Congress and the public can have confidence in the new process."
Waters said she is expecting a Government Accountability Office (GAO) early this year that looks more closely at restrictions of the program.
"I will continue to work with the OCC and the Federal Reserve Board to ensure transparency on this settlement and further explanation of the preliminary results of, and reasons for canceling, the IFR process."
In a Friday letter, Reps. Darrell Issa (R-Calif.) and Elijah Cummings (D-Md.), the top Republican and Democrat on the House Overnight and Government Reform Committee, asked the regulators to hold off on a deal until they could receive a briefing on the details.
“I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed," Cummings said Monday.
"I do not know what the rush was to make this settlement without answering these key questions, and although I look forward to obtaining information about how this deal may assist homeowners, 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.”
The agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.
Earlier on Monday, Bank of America announced that it will pay $10 billion to deal with servicing issues.
This story was updated at 2:30 p.m.