Mortgage deal could help 2 million Americans

A nationwide plan to help nearly 2 million homeowners hit by the mortgage meltdown and improper foreclosure practices could be announced as early as Thursday under a multi-state settlement hammered out by states' attorneys general and the nation's major lenders.

The proposed $25 billion deal would be the largest since the $206 billion settlement with the tobacco industry in 1998. Much of the bank settlement is expected to go to people who are having trouble paying theirmortgages or have lost their homes to foreclosure.

As many as 1 million homeowners could receive mortgage aid through the proposed deal, according to the Department of Housing and Urban Development.

About $17 billion is expected to go toward direct relief to borrowers, a big chunk of that being principal reductions, or the write-downs of mortgage debt, as well as other kinds of loan modifications or assistance. About $3 billion would go toward helping borrowers refinance into new, lower-cost loans.

An additional $5 billion would go toward a reserve account for state and federal programs and to individual homeowners harmed by bank practices. Negotiators have said that about 750,000 people could receive checks for about $1,500 to $2,000.

Two crucial holdouts to the deal, California and New York, were close to signing the agreement Wednesday night, although important stumbling blocks remained, according to people with knowledge of the negotiations.

The agreement could be postponed again, given the complicated nature of the settlement and the many parties involved, said these people, who wished to remain anonymous because they weren't authorized to speak publicly.

Government officials were making arrangements late into the evening for a flurry of announcements Thursday. A planned briefing by federal officials for reporters late Wednesday night was canceled amid last-minute negotiations, showing how much the situation was in flux.

The massive effort, more than a year in the making, is the most recent government attempt to boost the limping housing market and help people whose homes lost significant value in the housing crash.

But even such a sizable settlement pales against the scope of the housing problem. According to Federal Reserve Chairman Ben S. Bernanke, for instance, U.S. homeowners owe about $700 billion more than their homes are worth.

Monday was the deadline for individual states to either reject or accept a deal, though several key states, including California and New York, did not sign on then.

The settlement negotiations follow revelations in 2010 that the nation's largest banks allegedly had foreclosed on borrowers using improper and potentially illegal means.

The Obama administration has been pushing hard for a settlement among the state attorneys general and the nation's five largest mortgage servicers _ Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. _ and certain federal agencies.

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