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States Agree on $25B Foreclosure 'Robo-Signing' Deal

iStockPhoto/Thinkstock(NEW YORK) -- Officials from more than 40 states have signed a record $25 billion settlement with the five biggest banks related to foreclosure abuses, including "robo-signing" of documents. The practice involves the mass signing of forclosure documents without verifying the acccuracy of the paperwork.

For the past year, President Obama has advocated for a mortgage relief plan with the five biggest mortgage servicers -- Bank of America, JPMorgan Chase, Wells Fargo and Ally Financial --  to settle an investigation of foreclosure abuses.  Evidence of robo-signing foreclosure documents began to show in 2010 during a record national wave of foreclosed homes.

"This enables us to move forward into the very final stages of remaining work.  Federal and state officials, as well as representatives from the banks, continue to address matters that they must complete before finalizing any settlement," Iowa Attorney General Tom Miller said in a statement late Monday.

Several states had previously agreed to a $19 billion settlement that would be used for national mortgage relief. The deal was reported to designate $17 billion to pay for principal reductions and other relief for up to one million borrowers who are behind in payments but owe more than their houses are currently worth, The New York Times reported. The deal would also provide checks of about $2,000 to roughly $750,000 to people who lost homes to forclosure.

However, those settlements would change depending on the number of homeowners between Jan. 1, 2008, and Dec. 31, 2011 who accepted the offer.  Homeowners who participate in the settlement would still have the right to sue the banks, according to Patrick Madigan, the Iowa assistant attorney general, The New York Times reported.

California and New York had expressed interest in joining the deal but were the last major holdouts. 

New York State's attorney general Eric Schneiderman and California's attorney general Kamala Harris had previously said the settlement terms were not adequate. Schneiderman reportedly hopes to investigate the root causes of the financial collapse, and Harris wants stronger measures to benefit individual homeowners.

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