The German club had pipped Madrid to sign Herrera last summer but just a few months on, the Spanish player was keen to return home.
He signed his new professional contract in Valdebebas yesterday but is not eligible to play for Madrid's Under-19s until the club is given the green light from FIFA.
Murcia-born Herrero is a promising striker who demonstrated his abilities during his time with Villarreal. He put himself on the market as a free agent last summer and drew interest from Real Madrid and Barça.
However, eight months on, the youngster was keen to return to Spain and Madrid gave him the opportunity to do so.
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