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Report: Attorneys General Near $25B Foreclosure Settlement With Big Banks

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With holdout attorneys general in California and New York set to sign on, multiple reports Wednesday night said a nationwide foreclosure settlement with five major banks could be made official as early as Thursday.

The New York Times, citing state and federal authorities, said the deal of at least $25 billion aims to provide relief for the embattled housing market, but will only help a small number of the millions of delinquent borrowers whose homes are at risk of foreclosure.

From the NYT:

The success could depend in part on how effectively the program is put into effect because earlier efforts by Washington to help troubled borrowers aided far fewer than had been expected.

Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders. In addition, 300,000 homeowners are expected to be able to refinance their homes at lower rates, while another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000.

via States Negotiate $25 Billion Deal for Homeowners - NYTimes.com.

For the banks in question -- the five expected to be part of the deal are Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and Ally Financial (formerly GMAC) -- the cost of any such settlement is offset partially by reserves put in place for such settlements and also by the removal of a major source of uncertainty for investors.

While shares of bank stocks, particularly BofA, have been on fire to start 2012, concerns about just how much exposure firms still have to the looming foreclosure settlement, as well as litigation and regulatory charges over mortgage-backed securities, has lingered as a dark cloud over the industry's biggest names.

If a Greek debt deal is locked up this week to provide the embattled country with another dose of rescue funds in return for fresh austerity promises, it would mark two major points of uncertainty for the market that are at least partly resolved.