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What the $25B Foreclosure Settlement Means For You

iStockPhoto/Thinkstock(WASHINGTON) -- While the $25 billion foreclosure settlement announced on Thursday is a landmark multi-state deal, it is just a "drop in the bucket" that will help residents of some states more than others, housing advocates say.

The five biggest mortgage servicers, JPMorgan Chase, Citi, Ally Financial, Wells Fargo and Bank of America, have settled, but more lenders could potentially join later.  Under the deal, signed by 49 state attorney generals, 750,000 people could receive checks under the plan and another one million could see the size of their mortgages reduced.

President Obama said the deal could strengthen the overall economy but "by itself will not entirely heal the housing market."

"But this settlement is a start," the president continued.

Gordon Whitman, policy director for PICO National Network of faith-based community organizations, said the deal is "'too small."  The $10 billion in principal reduction compared to $700 billion in negative equity in the U.S. with an outstanding mortgage debt of $8.8 trillion is a "small drop in the bucket of what really needs to be done."

"It needs and will lead to much more significant principle reduction for American homeowners," he said.  "There are a lot of people talking about closure. From our perspective, it's much more logical to think of this as a first step."

The size of the deals per state thus far reflect the commitment of each attorney general, Whitman said.  Homeowners can check the website for more information by state, except for residents in Oklahoma.

"We think the continued advocacy by the attorney generals is the critical factor to make sure this is just a down payment on a full and fair settlement," Whitman said.

Scott Brown, chief economist with Raymond James, said the one million homeowners who may restructure their mortgages comprise only 10 percent of those underwater. Brown said the deal will not have a large impact on the U.S. economy or consumers.

"Every little bit helps and it will be significant for those restructuring, but it's not going to have a huge impact on the housing sector overall," he said. 

Payments of about $2,000 will be made to about three-quarters of a million households that were foreclosed on through abusive practices, distributed over three years.

"That will be good for those receiving checks, but the impact on overall consumer spending is likely to be relatively small," he said.

Copyright 2012 ABC News Radio

ABC News Radio