CHARLOTTE, NC (WBTV) - Bank of America and Wells Fargo Bank are among several big banks agreeing to overhaul the mortgage industry.
Government officials say the banks will pay up after deceptive foreclosure practices unfairly forced hundreds of thousands of people from their homes.
The $25 billion settlement isn't official yet, but if it is finalized it would be the biggest lawsuit settlement of a single industry since the states sued the tobacco companies 14 years ago.
And it would end a painful chapter that grew out of the financial crisis of 2008.
Since the housing bubble burst four years ago there's plenty of blame to go around.
Nearly 8 million Americans have faced foreclosure.
After homeowners got behind on their mortgages and when banks began processing some of those foreclosures in the late 2000s in some cases they failed to verify the information on foreclosure documents.
The worst practices known collectively as "robo signing" included employees signing documents they hadn't read or using fake signatures to sign off on foreclosures.
Attorneys general from the states sued, and Monday it was learned that the nation's five largest mortgage servicers have agreed in principal to a $25 billion settlement.
Dr. Tony Plath is a finance professor at UNC Charlotte and a banking industry expert.
"People who have been wrongly foreclosed against are going to complain that this is not enough compensation for their loss and at the same time the banks are going to complain that this is a lot of money," says Plath.
Those who lost their homes to foreclosure aren't likely to get their homes back or benefit much financially from the settlement.
About half of those who might be eligible to receive cash, 750,000 households, will likely receive checks for about $1,800.
The main crux of the agreement it will reshape long-standing mortgage lending guidelines and make it easier for people now at risk for foreclosure to restructure their loans.
And roughly one million homeowners could see the size of their mortgage reduced.
Does it go far enough? No says Plath but, "We've got to end the bickering. We've got to find a solution. It may not be the best solution for either party but to get this housing market back on its feet we've got to move forward."
Allen Johnston, a mortgage lender with Prime Lending in the SouthPark area, says another program set to be unveiled in March will help struggling homeowners who have kept up with their payments.. but because they owe more than their home is worth - so called "underwater" they aren't able to refinance their loan.
"It's going to help people who have high interest rates be able to refi into lower interest rates regardless of that and it's going to have different credit qualifying features to it. That's going to really.. it should help everybody," says Johnston.
The five major banks Bank of America and Wells Fargo included and the states attorneys general could sign off on the agreement within weeks.
Pres. Obama is expected to tout the settlement during his State of the Union address Tuesday night.
Since October 2010 when it came to light that banks were improperly executing foreclosures major banks temporarily suspended foreclosures. Discussions then began over a national settlement.